UNITED States stocks fell the most in five weeks after General Electric Co said last week that the credit-market crisis caused an unexpected earnings decline, while slowing economic growth and rising energy prices eroded profit at United Parcel Service Inc and Alcoa Inc.
GE posted the steepest weekly loss since the September 2001 terrorist attacks after cutting a profit forecast that Chief Executive Officer Jeffrey Immelt repeated a month ago. GE's plunge erased US$55 billion from its stock-market value. UPS, the world's largest package-delivery firm, and Alcoa, the third-biggest aluminum producer, shed after first-quarter earnings fell short of estimates.
The Standard & Poor's 500 Index lost 2.7 percent to 1,332.83 last week, putting the measure 15 percent below its October record high. The Dow Jones Industrial Average declined 2.3 percent to 12,325.42. The Russell 2000 Index of small-cap companies slumped 3.6 percent to 688.16.
GE's "key news was the slowdown they saw in orders and business activity in the last two weeks of March," said Joseph Veranth, a Wisconsin-based chief investment officer at Dana Investment Advisors, which manages US$2.8 billion. Its results show "there was a marked slowdown in economic activity."
The report from GE capped the first week of an earnings season projected to mark the third straight quarter of declining profits. Analysts reduced estimates for the 14th straight week on concern fallout from the US housing slump will spread beyond financial firms. Earnings at companies in the S&P 500 are forecast to fall an average of 12.3 percent in the first quarter and 3.8 percent in the second, according to estimates compiled by Bloomberg News.
Different world
GE, the world's biggest maker of power-plant turbines and jet engines, fell 15 percent to US$32.05 last week. Immelt said last Friday the Federal Reserve's March 14 move to help rescue Bear Stearns Cos created a "different world in financial services" that prevented GE from selling some assets. The company wrote down the value of loans and Chinese securities.
"There is still a lot of uncertainty," said Michael Strauss, who helps manage US$43 billion at Commonfund in Connecticut. "The question mark for GE is 'Is this a byproduct of something unfolding in the financial side, or something beyond the financial side?' Earnings will have to face some challenges."
UPS fell 4.7 percent to US$70.89. The company said first-quarter profit was as little as 86 cents a share as fuel costs rose and a sagging economy weighed on premium-priced air shipments to consumers.
Alcoa fell 9.9 percent to US$35.15. The first company in the Dow average to report first-quarter results said it earned 44 cents a share excluding some items, missing the 50-cent average analyst estimate.