Stocks fall as results from Bank of America, General Electric rattle investors

Bank of America, GE results push stocks lower

NEW YORK — Stocks ended a strong week with a flash of selling after Bank of America Corp. and General Electric Co. signaled that businesses and consumers are still struggling to pay off their debts.

The market slid Friday as quarterly results from the companies dented hopes that earnings would show strong signs of improvement in the July-September period. A rise in oil also helped the market end well off its lows, repeating a pattern seen earlier in the week.

The Dow Jones industrial average fell 67 points to finish just below the 10,000 mark, which it had broken through on Wednesday for the first time in a year. Despite the drop stocks still posted big gains for the week.

Bank of America lost more than $2.2 billion in the third quarter. The bank wrote down almost $10 billion in bad loans, about $1 billion more than in the previous quarter. The loss was steeper than expected and the write-offs stirred fears that struggling consumers won’t be able to increase their spending.

Rivals Citigroup Inc. and JPMorgan Chase & Co. also posted higher loan losses as part of their financial results this week. The reports underscored the challenges brought by high unemployment, weak consumer spending and diminished home values.

“It is, after all, the largest consumer bank and it may have just offered up a reminder that financial strains in the household sector haven’t gone away,” said David Rosenberg, chief economist and strategist at Gluskin Sheff, referring to Bank of America.

General Electric’s report also revealed signs of credit weakness. The conglomerate’s profit dropped 44 percent, hurt by much lower earnings at its financial arm, GE Capital, which loans money to a variety of businesses.

A drop in the mood of consumers fanned concerns that people nervous about jobs and the economy will hold off spending. The Reuters/University of Michigan consumer sentiment index fell to 69.4 in a preliminary reading for October from 73.5 in September.

Tim Knepp, chief investment officer of Genworth Financial Asset Management, said the reports from Bank of America and GE indicated that the stock market could be getting too far ahead of the economy. The Standard & Poor’s 500 index is up 60.8 percent from a 12-year low in early March.

“They’re still talking about a tough environment,” Knepp said, referring to the companies. “The market is a bit rich.”

The Dow fell 67.03, or 0.7 percent, to 9,995.91 after being down as much as 123 points at its low of the day. The broader S&P 500 index fell 8.88, or 0.8 percent, to 1,087.68, and the Nasdaq composite index fell 16.49, or 0.8 percent, to 2,156.80.

Two stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5 billion compared with 5.4 billion Thursday.

For the week, the Dow rose 1.3 percent, the S&P 500 index added 1.5 percent and the Nasdaq rose 0.8 percent.

Investors pored over the rush of bank reports during the week for signs that credit losses are stabilizing, which would help the economy recover.

JPMorgan reported a strong profit in part because of robust activity in its trading business, which compensated for its own higher loan losses. That helped push the Dow industrials over 10,000, a welcome sign of the market’s recovery. Stocks are still well below from their peak in October 2007.

Bank of America fell 84 cents, or 4.6 percent, to $17.26, while GE gave up 71 cents, or 4.2 percent, to $16.08.

The reports overshadowed solid results from Google Inc. that arrived after the closing bell Thursday. The Internet search company reported a record profit as revenue growth accelerated for the first time since the recession began in December 2007. The stock advanced $19.94, or 3.8 percent, to $549.85. During trading, it rose to $554.75, a 12-month high.

Google’s report and a rise in oil helped limit the day’s selling by lifting shares of energy companies. Crude oil rose 95 cents to settle at $78.53 a barrel on the New York Mercantile Exchange. Oil rose more than 9 percent during the week as the dollar slid.

Investors have continued to pump money into stocks even as many analysts worry that the market is getting overheated. Some of those who have been left out of the advance have been buying on the dips, as occurred Thursday and Friday.

That stream of new money could be disrupted if earnings reports signal that the economy will have trouble mounting even a modest recovery.

Most earnings from the third quarter have topped expectations, but the heaviest weeks of reports are yet to come. Reports are due next week from hundreds of companies ranging from Coca-Cola Co. to Microsoft Corp.

Investors also will get data on home construction and inflation as well as a region-by-region look at the economy from the Federal Reserve.

Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.42 percent from 3.46 percent late Thursday.

The dollar mostly rose against other major currencies, while gold prices rose.

The Russell 2000 index of smaller companies fell 7.16, or 1.2 percent, to 616.18.

Overseas, Britain’s FTSE 100 fell 0.6 percent, while Germany’s DAX index and France’s CAC-40 each dropped 1.5 percent. Earlier, Japan’s Nikkei stock average rose 0.2 percent.

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The Dow Jones industrial average closed the week up 130.97, or 1.3 percent, at 9,995.91. The Standard & Poor’s 500 index rose 16.19, or 1.5 percent, to 1,087.68. The Nasdaq composite index rose 17.52, or 0.8 percent, to 2,156.80.

The Russell 2000 index, which tracks the performance of small company stocks, rose 1.26, or 0.2 percent, for the week to 616.18.

The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 11,111.85, up 148.36, or 1.4 percent.