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. Last Updated: 07/27/2016

Dow Falls 1.96% on Earnings Reports

NEW YORK -- Lackluster earnings reports from Dow Jones industrials General Electric and Citigroup sent stocks plunging Friday, giving the Dow its biggest single-day percentage drop in nine months. The major indexes each lost more than 2 percent this week.

Soaring energy prices compounded the market's gloom over earnings, with crude oil returning to a four-month high on concerns about Iran's nuclear dispute.

While GE and Citigroup's results were just shy of analysts' estimates, the large-cap firms that released earnings this week would have needed blockbuster reports to satisfy Wall Street's overblown expectations, said Rick Pendergraft, an equity trader at Schaeffer's Investment Research.

"The ramp up we had into earnings let you know that people were expecting big things," Pendergraft said of the market's January rally. "Any time we go into an earnings season and the market is overbought, it sends up a caution flag for me."

At the close of trading, the Dow dropped 213.32, or 1.96 percent, to 10,667.39, giving back all of the 325 points it had gained this year. That was the largest one-day decline since April 15, when the index slipped 1.9 percent. It was also the biggest one-day point drop since the Dow lost 307.29 on March 24, 2003.

Broader stock indicators also finished sharply lower. The Standard & Poor's 500 index lost 23.55, or 1.83 percent, to 1,261.49, and the Nasdaq dropped 54.11, or 2.35 percent, to 2,247.70.

The situation in Iran and new threats of terrorist attacks on the United States propelled the energy market. A barrel of light crude surged $1.29 to settle at $68.48 on the New York Mercantile Exchange, where natural gas also bounced off recent lows.

Optimism that the Federal Reserve would soon end its string of interest rate hikes launched a New Year's rally that sent stocks to multiyear highs earlier this month, carrying the Dow above 11,000 for the first time since June 2001.

But Friday's retreat erased much of those gains, and left the Dow in negative territory for the year. For the week, the Dow lost 2.67 percent, the S&P 500 was down 2.03 percent and the Nasdaq declined 2.99 percent.

Although last week's earnings data was mostly downbeat, stocks would have had a tough time pushing higher after their recent advance, said Susan Malley, chief investment officer of Malley Associates Capital Management.

"Earnings haven't been disastrous thus far, we've just had some big names that were a bit conservative in their outlooks," Malley said. "The news is not terribly bad, it just has not met the expectations of the investing community."

The Russell 2000 index of smaller companies fell 10.34, or 1.45 percent, to 704.60.