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Dow Drops 2.3% for Week After GE Jolt

Stock closed sharply lower Friday as General Electric's earnings miss cast a gloomy haze over earnings season and consumer confidence hit a 26-year low.

The Dow Jones Industrial Average shed 2 percent to close at 12325.42, while the S&P 500 dropped 2 percent to 1332.83 and the Nasdaq skidded 2.6 percent to 2290.24.

For the week, the Dow is off 2.3 percent, the S&P 500 is down 2.7 percent and the Nasdaq has fallen a whopping 3.4 percent.

General Electric plunged 13 percent after the conglomerate reported an unexpected 6 percent drop in earnings and missed expectations as the economic slump and credit crunch squeezed profits across the board, though a lot of the problems were concentrated in the financial unit. Goldman Sachs downgraded its rating on GE to "neutral" following the report (GE is the parent of CNBC and CNBC.com.)

GE's decline, in percent terms, was the largest since Black Monday in 1987, when the stock shed 17.5 percent. The drop has shaved $46.9 billion off GE's market cap since yesterday. Nearly 366 million GE shares changed hands today, the largest daily volume on record.

Still, GE's jolt to the market wasn't seen as an omen of more bad things to come.

"The only perception that has changed today is the perception of GE's ability to forecast their own earnings," said Michael Cohn, chief investment strategist at Atlantis Asset Management.

"My feeling is that this market is actually acting very resilient for the amount of bad news it’s had to shake off over the last month or so," said Michael Cohn, chief investment strategist at Atlantis Asset Management. As long as the Dow stays in a range of 11700 to 12700, Cohn said, there isn't much cause for concern.

Industrials and techs led the decline Friday, with the S&P 500 industrial index finishing down 4.8 percent, followed by the S&P information-technology gauge, which dropped 3 percent.

Besides GE, engine maker Cummins, uniform manufacturer Cintas and adhesive-label maker Avery Dennison were among the biggest decliners among industrials.

And, with other blue-chip companies due to report earnings next week, the GE surprise sparked concerns that this was just the beginning of the bad news.

The Nasdaq fell more sharply than the Dow or S&P 500 as technology stocks were hammered by concerns about a slowdown in IT spending. Standard & Poor's cut its rating on networking-gear maker Cisco amid indications that customers are delaying orders. In the chip sector, Caris cut its price target on Nvidia and AMD's technology chief resigned, with no indication that the company plans to find a successor.

Among tech companies reporting earnings next week: Intel is due on Tuesday; IBM and eBay on Wednesday; Nokia and Google on Thursday; and, Xerox on Friday.

In today's episode of As the Yahoo Turns, Yahoo executives were said to be meeting to discuss alternatives to a Microsoft -- or now, Microsoft-News Corp. -- bid, the Wall Street Journal reported. Still, many insiders view a Microsoft deal sans News Corp. will be the most likely outcome, according to the paper.

Financials, already pretty beaten up, handled the GE news pretty well for most of the day, though the S&P financial index finished down 1.8 percent amid jitters ahead of next week's earnings from the sector.

JPMorgan is slated to report on Wednesday, Merrill Lynch on Thursday and Citigroup on Friday.

CIT Group , a GE rival in leasing and financing, fell 4.6 percent.

Washington Mutual dropped 4.1 percent after Goldman Sachs said the largest U.S. savings and loan may have to set aside $14 billion this year for credit losses, a statistic that prompted the brokerage to take the rare move of recommending that investors sell short WaMu stock. WaMu reports earnings on Tuesday.

Elsewhere on the earnings front, increased demand for cancer drugs helped Genentechbeat analysts' earnings target but sales of all four of its big brand-name drugs, including Avastin, fell short of forecasts.

In economic news, consumer sentiment fell to a 26-year low, according to a report from the University of Michigan. U.S. import prices rose 2.8 percent in March; excluding oil, all other import prices jumped 1.1 percent, the biggest increase on record.

Airlines continue to face troubles, as American Airlines, owned by AMR , canceled another 570 flights Fridayand another low-cost carrier, Frontier Airlines, filed for Chapter 11 bankruptcy protection. But unlike other airlines filing for bankruptcy in recent weeks, Frontier said it plans to keep running while it reorganizes.

Ailing home-goods retailer Linens 'n Things is also expected to file for bankruptcy, the Wall Street Journal reported. Earlier this week, rival Bed Bath & Beyond reported its earnings dropped 16 percent and issued a disappointing outlook as the housing slump continued to take a toll on home-related retailers.

On Tap for Next Week:

MONDAY: Retail sales, business inventories
TUESDAY: J&J, Intel, WaMu earnings; Empire State manufacturing; PPI
WEDNESDAY: Coke, JPMorgan, Wells Fargo, eBay, IBM earnings; mortgage applications; housing starts; CPI; industrial production; crude inventories; Beige Book; Fed's Yellen, Plosser speak
THURSDAY: Merrill Lynch, Nokia, Pfizer, Capital One, Google earnings; jobless claims; Philly Fed report; leading indicators; Fed's Kohn, Fisher speak
FRIDAY: Caterpillar, Citigroup, Honeywell, Xerox earnings; Fed's Lacker, Rosengren speak

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