By Donna Kardos Yesalavich
U.S. stocks fell sharply Friday, deepening their declines in
afternoon trading as major bank shares tumbled following reports of
a criminal probe into Goldman Sachs Group, Inc.
A monthly drop in consumer confidence and disappointing earnings
from some tech companies also dampened sentiment.
The Dow Jones Industrial Average (DJI) fell 101 points, or 0.9%,
to 11,067, adding to earlier losses and pushing its weekly drop to
more than 1%.
J.P. Morgan Chase (JPM) led the measure's declines with a drop
of 3.8%, while Bank of America Corp. (BAC) slid 3.5%, as investors
grew increasingly concerned about how a criminal investigation into
Goldman Sachs (GS) could eventually affect other big banks.
The probe, being conducted by federal prosecutors, is looking
into whether Goldman or its employees committed securities fraud in
connection with its mortgage trading. Goldman, which isn't a Dow
component, tumbled 8.9%.
It is now down more than 14% for the month of April, putting the
stock on track for its worst month since the fall of 2008.
The Nasdaq Composite (RIXF) declined tumbled 1.4%. The Standard
& Poor's 500-stock index (SPX) fell 1.1%. The financial sector
led its declines with a drop of 2%, while technology and
consumer-discretionary stocks were also weak.
The decline in tech stocks came as a number of companies in the
sector reported disappointing earnings.
MEMC Electronic Materials (WFR), which makes silicon wafers for
the solar and semiconductor industries, tumbled 18% after the
company swung to a first-quarter loss as overhead costs more than
doubled.
McAfee (MFE) slid 11% after it posted a 30% drop in
first-quarter profit as the antivirus-software maker was hit by
currency fluctuations and delays in deal closings.
Weighing on the consumer-discretionary sector, the University of
Michigan/Reuters consumer sentiment index's final reading for April
fell to 72.2, from a final March reading of 73.6.
Decliners in the sector included J.C. Penney (JCP), which
dropped 3.6%, Abercrombie & Fitch (ANF), which slid 5%, and
Macy's (M), which dropped 5.8%.
The energy sector was also weak, although its declines pared
from earlier in the session. Investors are getting increasingly
worried about the potential fallout of the huge oil spill in the
Gulf of Mexico, which reached the Louisiana coast. The government
called in the U.S. Navy to help contain it. Among the stock
decliners, Halliburton (HAL) and Diamond Offshore Drilling (DO)
shares dropped 3.6%.
Crude-oil prices climbed to nearly $86 a barrel as White House
officials said new domestic offshore oil drilling will be on hold
until the investigation of the spill is complete, but that
currently approved oil and gas projects could go forward.
Even with Friday's declines, the Dow is on track to close up its
third straight month of gains, despite some turbulent days when
instability in Greece and news of the fraud charges against Goldman
Sachs roiled markets. The measure has gained over 12 of the last 14
months.
The Commerce Department's report of U.S. economic growth in the
first quarter was relatively upbeat. It estimated the U.S. economy
grew at a 3.2% annual rate in the first three months of the year.
Consumer spending accelerated in the first quarter and the core
inflation rate, which excludes food and energy prices and is
closely watched by the Fed, fell to its lowest number in 51
years.
"Once you start dissecting what was moving inside GDP, the
consumer seemingly is doing ok," said Christian Hviid, chief market
strategist at Genworth Financial Asset Management. "It's not bad
when you think about what the consumer's done the last four
quarters before this one."
Still, Hviid noted consumer spending was still being boosted by
government programs including stimulus funds, unemployment benefits
and tax credits in the first quarter. Investors are concerned about
how it will look once the stimulus goes away."It's a suspect
recovery," Hviid said. "We have the proper ingredients, but we
still need to see a more robust, sustainable employment landscape
to suggest that the recovery does indeed have legs to it."
The euro strengthened against the dollar after Greece agreed
with the International Monetary Fund and the European Union to take
additional austerity measures expected to yield "around EUR23
billion" ($30 billion) as a precondition for financial assistance,
a Greek official familiar with the talks on aid said.
Treasurys advanced, pushing the yield on the 10-year note down
to 3.65%. Gold futures rose.
The U.S. Dollar Index (DXY), which represents the dollar against
a basket of six other currencies, fell to 81.915