Maybe earnings season isn’t going so well after all.
That was the apparent conclusion of investors Friday, as a sell-off drove the stock market to its steepest one-day decline since June. It came after a series of mediocre earnings reports from corporate titans including Microsoft and General Electric.
The Standard & Poor’s 500-stock index ended the day down 1.7 percent, as the Dow Jones industrial average fell 205 points, or 1.5 percent, on the 25th anniversary of the stock market collapse known as “Black Monday.” The decline in tech stocks was even steeper, with the Nasdaq composite index off 2.2 percent.
It was the second straight down day after the stock market began the week with three consecutive days of gains. The decline reflected a rising sense that some of the optimism that had been building amid decent earnings numbers earlier in the week was overdone.
“The first few days of the earnings season, the market was doing very well and maybe we got a little ahead of ourselves,” said Andy Brooks, the head of equity trading at T. Rowe Price. “Today, on balance, people were saying, ‘Let’s not get too euphoric.’ ”
It was hardly a dramatic reversal, though. The market still rose for the week, with the S&P 500 up 0.3 percent.
Industrial giant General Electric said Friday that 2012 revenues will rise only about 3 percent, not the 5 percent that was estimated as recently as last month. Its third-quarter earnings also came in below analyst estimates, as the firm shrunk its finance unit. Shares of GE, one of the members of the Dow Jones industrial average, fell 3.4 percent on the day.
“Europe is tough, Asian resource-rich countries are okay and U.S. had pockets of growth but still some uncertainty,” GE chief executive Jeffrey Immelt said in a conference call with investors.
Microsoft, meanwhile, said after the markets closed Thursday that its earnings also missed analyst estimates, citing weak global demand for personal computers. Its shares fell 2.9 percent Friday.
McDonald’s shares also declined steeply, off 4.1 percent, after the fast-food giant’s third-quarter numbers showed a 3.5 percent decline in revenue growth compared with the same period of 2011, and it reported that at restaurants open at least a year, revenue was up 1.2 percent, not the 1.7 percent analysts had forecast.
The decline in stocks coincided with a rally in Treasury bonds. The yield on 10-year U.S. government bonds, which moves inversely to bond prices, fell 0.07 points to 1.76 percent.
International markets were buffeted by the same rise in pessimism as that seen in the United States, though they recorded less dramatic declines: Britain’s FTSE 100 index was down 0.4 percent and Germany’s Dax index was down 0.8 percent.
Still, the sell-off wasn’t enough to undermine what has been a generally good 2012 for the stock market. The S&P 500 is up 14 percent for the year.
“It’s important to note the market has had a very good showing this year,” Brooks said. “I think we can shrug this off and continue to march along.”