By Amy Caren Daniel
(Reuters) - U.S. stocks resumed their selloff on Friday, with the S&P poised to join the Nasdaq in correction territory, sparked by grim earnings reports from Alphabet and Amazon that eclipsed data showing the U.S. economy continued to grow at a healthy clip.
The Nasdaq tumbled nearly 3 percent. The Dow sank 1.7 percent and the S&P 2.3 percent, with the S&P's session low taking it more than 10 percent below its Sept. 20 all-time closing high. If it closes at these levels, this would confirm a correction.
While the U.S. economy continues to grow, despite trade wars, the same cannot be said of U.S. corporate profit growth, with a slew of disappointing forecasts this earnings season showing how tariffs, rising wages and borrowing costs, as well as jitters over geopolitical events are hitting companies.
The latest and, perhaps the most high-profile, came last night from Amazon.com Inc and Alphabet Inc, two stocks that have helped power the equity markets decade-long bull run.
Amazon tumbled 8.7 percent after it missed quarterly sales estimates and gave a below par holiday-season sales forecast, sparking a 3.07-percent plunge in the S&P consumer discretionary sector.
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Google-parent Alphabet sank 4 percent after its revenue missed estimates, fanning concerns that regulatory scrutiny and competition would throttle its scorching pace of growth.
That triggered a drop in other members of the so-called FAANG group. Facebook Inc fell 3.9 percent, Apple Inc slid 2.1 percent and Netflix Inc dropped 5 percent.
Apple led the S&P technology index down 2.64 percent, while the communication services sector, home to the rest of the FAANGs, dropped 3.07 percent.
"Expectations were really high going in to Google and Amazon's earnings. Investors were looking at their earnings to maybe prop up the market and get us out of this correction that we've been in," said Paul Brigandi, managing director and head of trading at Direxion in New York.
"The correction was initially driven by interest rates and tariffs, so people were looking forward to earnings season to get us out of the downward trend we're in."
The selloff got some respite from data showing U.S. gross domestic product growth slowed less than expected in the third quarter as a tariff-related drop in soybean exports was partially offset by the strongest consumer spending in nearly four years and a surge in inventory investment.
"Even though the GDP numbers were good, they only gave a temporary relief to the markets," said Brigandi.
At 11:15 a.m. EDT the Dow Jones Industrial Average was down 428.64 points, or 1.72 percent, at 24,555.91, the S&P 500 was down 61.93 points, or 2.29 percent, at 2,643.64 and the Nasdaq Composite was down 215.49 points, or 2.94 percent, at 7,102.85.
A clutch of weak outlooks on Wednesday pushed the Nasdaq into correction territory and erased the Dow and the S&P 500's gains for the year. On Thursday, Microsoft Corp's strong earnings led a rally that pulled the S&P and the Dow back into the black for 2018.
Intel Corp stood out amid the carnage in technology stocks, jumping 3.1 percent after its better-than-expected quarterly results, though interim Chief Executive Officer Bob Swan said trade tensions with China could be a "headwind" next year.
Declining issues outnumbered advancers for a 5.72-to-1 ratio on the NYSE and a 4.29-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and 85 new lows, while the Nasdaq recorded four new highs and 277 new lows.
(Reporting by Amy Caren Daniel and Savio D'Souza in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)