Pat Dollard

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Wall Street Journal:

Financials led U.S. stocks lower as a double dose of discouraging reports on the corporate sector and the economy weighed on shares, sending the Dow Jones Industrial Average down more than 200 points.

Bank of America’s 8% drop led the blue chips lower, erasing the index’s weekly gains amid concerns the economy is expanding too slowly to spur corporate growth. Adding to the jitters was a morning report that showed consumer sentiment dropped to its worst level since March 2009, the latest in a string of downbeat data that slammed Wall Street.

On the corporate front, investors turned pessimistic about growth prospects for major U.S. companies as Bank of America, Citigroup and General Electric posted lackluster results. There also was concern about how financial-regulatory overhaul will hurt earnings for the banking sector, which was the biggest decliner on the Standard & Poor’s 500-stock index Friday.

“The earnings reports we’ve had so far have been pretty decent, but Bank of America and Citigroup were more of a mixed bag,” said Randy Frederick, director of trading and derivatives at Charles Schwab.

He said those reports added to investors’ concerns about the broader economy following disappointing economic news in recent weeks, underscored by Friday’s weaker-than-expected reading on consumer sentiment.

“For the past several months the majority of the economic reports have been positive enough to say we’re still in a long-tem growth trend, but within the past couple weeks the trend is becoming less positive,” Mr. Frederick said. “It’s almost like we’re flattening out.”

The Dow, which snapped its seven-day winning streak Thursday, is down 0.3% for the week, while the S&P 500 has dropped 0.5%. The Dow was recently down 215 points, or 2.1%, to 10144, and the S&P 500 declined 2.3%, to 1072.

The Nasdaq Composite declined 2.4%, to 2195, weighed by a 5.5% drop in Google, which posted disappointing second-quarter results as its search business continued to show signs of slowing growth.

Apple shares were trading slightly down as CEO Steve Jobs said the company will give away free cases as a remedy for the iPhone 4 antenna problems.

The potential longer-term fallout from the financial-regulation bill that the Senate passed Thursday also weighed on the financial sector. Citigroup fell 4.3% and J.P. Morgan Chase fell 3.4%.
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Goldman Sachs Group bucked the trend to rise 1.9%, although the stock was up as much as 4.7% in earlier trading, as the investment bank’s settlement with Securities and Exchange Commission lifted an overhang on the stock.

BP slipped 3.9%, although the oil company’s well-integrity test survived the night as pressures steadily rose, showing that a newly placed cap might have the ability to shut an overflowing well in the Gulf of Mexico. Despite Friday’s declines, the stock is up 10% this week and up 40% off the multiyear lows hit last month.

In other economic data, the Labor Department said the seasonally adjusted consumer price index fell 0.1% last month, less than an unrevised 0.2% in May but a bigger decline than expected. Economists had been looking for the rate to remain unchanged.

Core consumer prices, closely watched by the Federal Reserve, were up 0.2%, more than the 0.1% increase expected by economists. That larger-than-expected increase in core prices shouldn’t change expectations that the Fed will hold interest rates at record lows well into next year, though it will likely ease fears of deflation.

In other markets, the euro hit a two-month high against the dollar, breaking the $1.30 barrier before slipping back slightly. Treasurys moved higher, with the yield on the 10-year note falling below 3.0%.

Oil futures fell, while gold also dropped.