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Bank of America, GE results push stocks lower

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.

Stocks slid yesterday as quarterly results from the companies dented hopes that corporate 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, following a similar pattern from earlier in the week.

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

Bank of America lost more than $2 billion after preferred dividends in the third quarter. The loss was steeper than expected and stirred fears that struggling consumers won't be able to increase their spending. The bank, one of the largest recipients of government bailout funds, said its losses from failed loans came to almost $10 billion.

Rivals Citigroup Inc. and JPMorgan Chase & Co. also posted higher loan losses this week that 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.

The Dow fell 67.03, or 0.7 percent, to 9,995.91 after being down as much as 123 points earlier in the day.

The broader Standard & Poor's 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 volume came to 1.4 billion, in line with Thursday.

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.

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.

Tim Knepp, chief investment officer of Genworth Financial Asset Management, said the reports from Bank of America and GE reminded investors that a recovery in the economy will be difficult and that the stock market could be getting too far ahead of the economy.

"They're still talking about a tough environment," he said. "The market is a bit rich."

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.

The Bank of America and GE reports overshadowed solid results from Google Inc. that arrived after the closing bell Thursday.

Investors have pored over the rush of bank reports this week for signs that credit losses are stabilizing, which would boost confidence that the economy is improving.

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 the 10,000 mark on Wednesday.

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.

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. Oil and other commodities are priced in dollars so a drop in the currency makes commodities more attractive to overseas buyers.

Investors have continued to pump money into stocks even as many analysts worry that the market is getting overheated. The S&P 500 index is up 60.8 percent from a 12-year low in early March and some of those who have been left out of the advance have been buying on the dips.

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. Weak revenue at some companies has been worrisome to investors, who want to see businesses increase their profits through sales growth and not just cost-cutting.

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, sales of existing homes, inflation as well as a region-by-region look at the economy from the Federal Reserve.

In other earnings news, Google 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.

IBM Corp. fell $6.34, or 5 percent, to $121.64 after the company signaled that its business is improving but still down from where it had been. The value of services contracts that the company signed in the third quarter fell 7 percent from a year earlier.

Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.41 percent from 3.46 percent late Thursday.

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


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