Dow sinks as earnings, housing sting
Benchmark index tumbles over 100 points a day after topping 14,000, its highest close ever; Google, Caterpillar, Ericsson all disappoint.
NEW YORK (CNNMoney.com) -- The Dow lost nearly 150 points Friday, a day after closing above 14,000 for the first time ever, as a spate of weak earnings news and continued housing fears rattled markets.
The Dow (down 149.33 to 13,851.08, Charts) sank over 1 percent, while the broader S&P 500 (down 18.98 to 1,534.10, Charts) and the tech-heavy Nasdaq (down 32.44 to 2,687.60, Charts) each fell about 1.2 percent.
The dollar hit a all-time low against the euro, bonds rallied and oil fell.
Despite the record-setting day Thursday, stocks still finished lower for the week. The Dow ended the week down 0.4 percent, while the S&P lost 1.1 percent and the Nasdaq declined 0.7 percent.
Next week investors will look forward to an advance reading on economic growth and numbers on the home sales. Both will be closely watched as economic growth has been slowing and real estate has deflated.
Stocks rallied Thursday, pushing the Dow, a blue-chip barometer that tracks 30 large companies, to its highest finish ever.
But a big miss from Dow component Caterpillar dashed hopes of another record- setting day Friday.
The heavy equipment maker said its net profit fell 21 percent and posted earnings of $1.24 a share, versus estimates for $1.49 a share. Caterpillar (down $3.78 to $83.20, Charts, Fortune 500) shares slid over 4 percent, although they were down over 9 percent earlier in the session.
Lackluster earnings in the tech sector also weighed on stocks.
Google (down $28.47 to $520.12, Charts, Fortune 500) reported earnings late Thursday that missed Wall Street's estimates even as its quarterly sales soared. The earnings miss - only the second since the Internet search firm went public in 2004 - rattled investors who have grown accustomed to solid results from the company. Google shares tumbled 5 percent.
Swedish firm Ericsson, the biggest maker of cell phone network equipment, also reported earnings that fell short of analysts' expectations early Friday. Ericsson (down $2.25 to $39.84, Charts) shares fell 5 percent.
"Google and Caterpillar have really taken the wind out of the sails," said Todd Clark, Director of stock trading at Nollenberger Capital Partners in San Francisco. "But this is just some healthy consolidation. The market really looked a little long in the tooth yesterday."
"Earnings are partly a factor, but they are not the whole thing," said Larry Peruzzi, a stock trader at The Boston Company Asset Management.
Peruzzi said the fact that the Dow hit the 14,000 mark Thursday, but just barely, was also giving investors pause.
"As the market gets up there, it acts as a reflection point," he said, noting that the Dow has often dropped after hitting other psychologically important benchmarks like 12,000 or 13,000.
Peruzzi said from comments Federal Reserve member William Poole that the subprime mortgage sector was large enough to affect the broader housing market also dampened the mood.
Defaults on mortgages in the subprime sector have risen sharply in the last few months, resulting in the implosion of several subprime mortgage lenders and funds that bought the repackaged debt.
Poole's comments follow those from Fed Chairman Ben Bernanke, who earlier this week told lawmakers that subprime losers could total $100 billion.
While so far limited, Bernanke said a housing slowdown had the potential to cut into consumer spending, hurting the broader economy. His comments helped stocks close lower Wednesday.
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