April 11 (Bloomberg) -- U.S. stocks fell the most in two weeks after General Electric Co.'s unexpected earnings decline increased concern that the economic slowdown is spreading.
GE, the world's third-biggest company by market value, tumbled the most in 20 years after earnings slumped 12 percent because of failed asset sales and higher-than-forecast losses at its finance businesses. 3M Co. and Disney Co. also led declines in 24 of 30 Dow Jones Industrial Average stocks. Nine of 10 industry groups in the Standard & Poor's 500 Index retreated as the benchmark for U.S. equities extended its worst weekly drop in more than a month.
``We are seeing the collateral damage to the economy,'' Bill Strazzullo, chief market strategist at financial advisory firm Bell Curve Trading, said in an interview with Bloomberg Television. ``We saw this with retail sales, consumer confidence, now we are seeing this with the General Electric earnings. When you look at this from the vantage point on the effect of the broader economy, things are getting worse.''
The S&P 500 slid 14.66 points, or 1.1 percent, to 1,345.89 at 11:27 a.m. in New York and is down 1.7 percent in the week. The Dow average lost 143.55, or 1.1 percent, to 12,438.43. The Nasdaq Composite Index decreased 32.28, or 1.4 percent, to 2,319.42. Three stocks declined for every one that rose on the New York Stock Exchange. European shares reversed gains after GE's report. Asian markets, which closed before GE's results, rose for a second day.
Reduced Estimates
Analysts have reduced profit estimates for 14 straight weeks this year on concern the fallout from the subprime mortgage market's collapse will spread beyond financial companies. Earnings at companies in the S&P 500 are forecast to fall an average 12.3 percent in the first quarter and 3.8 percent in the second, according to estimates compiled by Bloomberg. The Jan. 4 survey predicted first-quarter earnings would increase 4.7 percent.
Stocks also retreated after the Reuters/University of Michigan preliminary index of confidence among U.S. consumers slumped to a 26-year low in April as the labor market continued to weaken and gasoline prices rose.
GE lost $4.12, or 11 percent, to $32.56. The company said profit from continuing operations dropped to $4.36 billion, or 44 cents a share, from $4.93 billion, or 48 cents, a year ago, trailing the average analyst estimate of 51 cents. GE's miss came without warning after it was forced to reduce the value of some securities in the last two weeks of March as capital markets seized, Chief Executive Officer Jeffrey Immelt said.
3M Co., the maker of 50,000 products, slid $1.76 to $78.59. Disney, the second-biggest U.S. media company, lost 67 cents to $30.68.
Fed Bets
Citigroup Inc., the largest U.S. bank, climbed 52 cents to $24.23. Wells Fargo & Co., the fifth-biggest, added 16 cents to $28.68. Traders boosted bets the Fed will cut its benchmark interest rate by half a percentage point to 1.75 percent at its April 30 meeting, according to Fed funds futures trading. The odds of a half-point cut are 52 percent, up from a 42 percent chance yesterday. The rest of the bets are for a quarter-point reduction.
Washington Mutual Inc., the largest U.S. savings and loan, slid 14 cents to $11.28 after Goldman analysts recommended selling the shares short. The company will probably lose $3.30 a share this year, Goldman analysts, including New York-based James Fotheringham, said in a note to investors. Goldman previously forecast a 2008 loss of $1 a share.
BlackRock, Frontier Air
BlackRock Inc., the largest publicly traded money manager in the U.S., fell $9.63 to $210.76 after Goldman and Wachovia lost ``buy'' ratings from analysts at Goldman and Wachovia Corp. after the stock price rose 39 percent in the past year.
Frontier Airlines Holdings Inc. plunged $1.19, or 76 percent, to 38 cents after the U.S. discount carrier that serves 70 destinations from Denver filed for bankruptcy protection, becoming the fourth U.S. airline to do so in less than a month.
Frontier took the step after its main credit-card processor began withholding proceeds from ticket sales, it said in a statement today. The carrier pledged to continue flying and keep paying workers while it seeks additional financing.
AMR Corp., the parent of American Airlines, dropped 19 cents to $9.68. The company said it expects to operate about 60 percent of the flight schedule for its Boeing Co. MD-80 jets by 5 p.m. New York time after canceling 930 flights yesterday and 1,094 on April 9 to inspect and repair wiring.
CIT Group Inc., the commercial finance company trying to escape a cash squeeze, fell for a fourth day, dropping 86 cents, or 7 percent, to $11.50 on concern that earnings may be worse than forecast. JPMorgan Chase & Co. analyst George Sacco lowered his 2008 profit estimate 56 percent yesterday to $1.95 a share, from $4.45, forecasting lower fee revenue and losses from student lending. CIT said on April 3 its unprofitable student-lending unit stopped making government-guaranteed loans.
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