U.S. stocks slid, wiping out a weekly advance, as revenue at Bank of America Corp., Citigroup Inc. and General Electric Co. missed analyst estimates and a gauge of consumer confidence slid to the lowest in a year.
Bank of America tumbled 9.2 percent, the most since June 2009, while Citigroup retreated 6.3 percent and GE lost 4.6 percent. Google Inc. sank 7 percent after earnings trailed the average analyst estimate following a surge in spending. Goldman Sachs Group Inc., the most profitable firm in Wall Street history, rallied 0.7 percent after agreeing to pay $550 million and change its business practices to settle federal government claims it misled investors.
The Standard & Poor's 500 Index dropped 2.9 percent to 1,064.88 at 4 p.m. in New York, the biggest drop this month. It fell 1.2 percent this week, erasing its gain after the Thomson Reuters/University of Michigan index of consumer sentiment fell more than economists estimated. The Dow Jones Industrial Average lost 261.41 points, or 2.5 percent, to 10,097.90 today.
“Companies have been exceeding or meeting earnings expectations on cost cuts, not on demand for their products and services,” said Terry Morris, who manages $2 billion at National Penn Investors Trust Co. in Wyomissing, Pennsylvania. “I think the market is pricing in more than we're going to see” in the way of revenue growth.
The S&P 500 climbed 7.2 percent from July 2 through yesterday amid optimism that corporate earnings would signal the economic recovery is sustainable. S&P 500 companies are projected to increase profits by 34 percent in 2010 and 18 percent in 2011, the fastest two-year gain since 1995, according to analyst estimates compiled by Bloomberg. Of the 23 companies in the S&P 500 that reported since July 12, all but three have topped forecasts for earnings-per-share, Bloomberg data show.
Revenue for the group that has reported so far has increased 2.6 percent, with 17 of 23 companies beating analyst estimates, according to the data.
Bank of America, the largest U.S. bank by assets, slid 9.2 percent to $13.98 to lead financial companies to the biggest decline among 10 industry groups in the S&P 500. Citigroup, the third-biggest, retreated 6.3 percent to $3.90. GE, the world's largest maker of jet engines and power-plant turbines, fell 4.6 percent to $14.55. The three companies beat analyst estimates for per-share earnings while missing on sales.
“Revenue is more of a challenge when the economy's not growing very fast,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, which oversees $500 million. “I'm more impressed that there's been no real extreme negative future guidance.”