NEW YORK (REUTERS) - Wall Street fell sharply Friday morning as GE's comments on the economy and its disappointing forecast weighed on industrials stocks, but a rally in Microsoft and McDonald's helped limit losses.
GE's shares were off 2.3 per cent, weighing the most on the S&P, after the conglomerate lowered its full-year revenue growth target and narrowed its profit forecast.
The company reported sluggish growth in its power business, its largest division, in the latest quarter and said slow economic growth, particularly in the oil and gas business, weighed on revenue.
The S&P 500 industrial index tumbled 1.17 per cent to a more than three-month low. United Technologies and 3M both fell roughly 1 per cent. "Although earnings have been coming in mixed, GE's comments of a sluggish economy is causing investors to take a step back,"said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
At 9:39 a.m. ET (9:39 p.m Singapore time) the Dow Jones Industrial Average was down 95.7 points, or 0.53 per cent, at 18,066.65. The S&P 500 was down 9.61 points, or 0.45 per cent, at 2,131.73 and the Nasdaq Composite was down 11.54 points, or 0.22 per cent, at 5,230.30.
Helping curtail the losses were Microsoft and McDonald's, both of which reported strong quarterly results.
Microsoft's stock surged 5.6 per cent at an all-time high of US$60.45 (S$83.9), while McDonald's rose 3.10 per cent. The two stocks were the top boosts to the S&P and the Dow. Nine of 11 major S&P 500 companies were trading lower. The only gainers were technology and consumer staples , which was boosted by Reynolds American.
Reynolds surged 17.24 percent after British American Tobacco's US$47 billion-offer to buy the 58 percent of the tobacco company it doesn't already own.
Also denting sentiment was the persistent strength in the strong dollar, which affects the overseas income for companies. The dollar was up 0.43 per cent at 98.73.
About 78.5 percent of the 107 S&P 500 companies that have reported until Thursday have beaten earnings expectations. Profits of the S&P's components are now expected to have risen 1 percent in the quarter, according to Thomson Reuters I/B/E/S.
Volatility in the markets are expected to increase as the U.S. presidential election draws near, while investors assess mixed signals from the Federal Reserve on the future path of interest rate hikes.
Declining issues outnumbered advancing ones on the NYSE by 2,126 to 512. On the Nasdaq, 1,771 issues fell and 461 advanced.
The S&P 500 index showed three new 52-week highs and three new lows, while the Nasdaq recorded six new highs and 11 new lows.