Poor earnings slam Wall St with worst loss in 4 months

U.S. stocks suffered their worst day since late June on Friday, after bellwethers General Electric and McDonald's extended a string of disappointing earnings.

The Nasdaq ended down 2.19 percent, dragged lower for a second day by Google's weak results. Microsoft dropped 2.9 percent to $28.64 after it said profits fell on poor sales of PCs. Google's stock lost 1.9 percent to close at $681.79.

For the Dow, Friday's decline marked its worst day since June 21 - with the sell-off coming on the 25th anniversary of Black Monday, the Dow's worst single-day percentage loss ever.

For Wall Street, corporate America's top-line figures are of particular concern. The beat rate for revenue forecasts is just 41.4 percent, compared to the long-term average of 62 percent, according to Thomson Reuters data.

 

General Electric Co shares fell 3.4 percent to $22.03. Quarterly earnings met Wall Street's expectations, but revenue fell short of estimates. GE, however, stood by its full-year earnings forecast.

"Going into the earnings season, traders were more forgiving of a weaker period, but the forward guidance is killing us now," said Todd Schoenberger, managing principal at the BlackBay Group in New York.

"McDonald's, Chipotle, Coca-Cola have all been slammed. And Wal-Mart, Target, even Dollar Stores are getting hit. That's tough to stomach because across income levels, everything is sharply lower."

McDonald's Corp lost 4.5 percent to hit $88.72 and Chipotle Mexican Grill fell 15 percent to $243 after quarterly profits missed analysts' expectations.

The S&P 500 still managed to gain 0.3 percent this week, but the Dow eked out a gain of just 0.1 percent.

The sharp declines boosted expectations of near-term volatility. The CBOE Volatility Index <.VIX>, Wall Street's gauge of investor anxiety, rose 13.5 percent to end at 17.06 - off its intraday high of 17.60. Options expiration also contributed to Friday's heavy activity.

The Dow Jones industrial average <.DJI> tumbled 205.43 points, or 1.52 percent, to 13,343.51 at the close. The Standard & Poor's 500 Index <.SPX> dropped 24.15 points, or 1.66 percent, to 1,433.19. The Nasdaq Composite Index <.IXIC> slid 67.24 points, or 2.19 percent, to close at 3,005.62.

"This sell-off is definitely earnings-driven, but there is also an element of profit taking after several strong days," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. "But it is a very quiet crash, coming on the anniversary of the 1987 collapse."