Stocks Slide; Citigroup, P&G Drag on Dow

Stocks retreated after an early pop from a better-than-expected GDP report as anxiety over the foggy forecast got the best of the market.

Gross domestic product dropped 3.8 percentin the first of three readings on Q4 GDP, much less than the 5.3-percent drop expected. Still, it was the fastest rate of decline in nearly 27 years.

This marked the first back-to-back quarterly declines since late 1990-early 1991, fitting the textbook definition of a recession. The economy shrunk 0.5 percent in the third quarter.

A big part of the surprise came from a big drop in the trade deficit and a miscalculation of the impact of oil prices, Standard & Poor's Chief Economist David Wyss told Reuters.

Of course, things are moving so fast in this market, you can't look back too long or you might get whiplash.

The GDP beat "should be a mild help for the market, but this is for 2008. Nobody cares about 2008, we're talking about 2009 now," Wyss said.

Meanwhile, a gauge of consumer sentiment ticked higher in a final January reading. Reuters and the University of Michigan reported their consumer-sentiment index rose to 61.2, a four-month high.

Procter & Gamble was one of the biggest drags on the Dow after the consumer-products maker met analysts' target of $1.58 a share but saw an unexpected decline in sales.

Banks opened higher but that quickly faded and Dow components Citigroup and Bank of America fell sharply.

>> Why is the market so focused on bank stocks? shares soared nearly 20 percent after the online retailer blew past earnings expectationslateThursday.

Oil giants Exxon and Chevron advanced after both firms topped earnings forecasts.

Exxon said its quarterly profit fell 33 percentbut analysts had expected a more severe drop, given the plunge in crude prices. Chevron reported its earnings rose slightly during the quarter.

Caterpillar shares came under pressure after Goldman Sachs added CAT to its "conviction sell" list, maintaining that the construction equipment manufacturer faces a difficult year that could include a 50 percent drop in earnings and a dividend cut.

Caterpillar also announced its second round of layoffs this week, saying it will lay of an additional 2,110 workers at three plants in Illinois. On Monday, the company said it would cut nearly 20,000 jobs and warned of a tough year ahead.

Honeywell met Wall Street expectations of 97 cents a share and backed its outlook.

Pharma stocks opened weak after Roche launched a hostile $86.50 bid for Genentech after a previous offer of $89 was rejected.

In Washington, officials from the Obama administration pushed on with the creation of “bad banks” to buy toxic assets by holding around the clock meetings with senior Wall Street executives.

This came as President Obama took a swipe at Wall Street Thursday, saying the more than $18 billion handed out in bonuses last year was "shameful."

And, in Illinois, the state senate ousted Gov. Rod Blagojevich after a unanimous vote at his impeachment trial.

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