Dow and S&P 500 fall on profit worry, GE's outlool

NEW YORK - Stocks fell on Wednesday as a big rally faltered in the last minutes of trading on worry about the weakening corporate profit picture after a news report raised questions about General Electric's earnings outlook.

In a move that has been the trademark of the market's volatility ever since Lehman Brothers' bankruptcy filing in mid-September, the Dow plunged more than 300 points in the last 12 minutes, dashing prospects for the first back-to-back gains in a month.

Aside from the GE news, reported by Dow Jones with less than 15 minutes left in the session, traders said hedge funds and mutual funds were dumping stocks to raise cash to repay clients and lenders, while other investors were eager to lock in some profit from Tuesday's huge rally.

General Electric's stock fell 4 per cent in the last minutes of trading, only to end down 1.5 per cent at US$19.20.

Dow Jones reported that General Electric's Chief Executive Jeffrey Immelt said GE aims at keeping 2009 profits at the same level as this year, even if revenue drops 10 per cent to 15 per cent.

But after the closing bell, GE told CNBC that the CEO's comments were taken out of context and that Mr Immelt gave no new forecast. GE owns CNBC.

Trading was volatile after the Federal Reserve slashed interest rates by half a percentage point, the latest in the series of moves to keep the credit crisis from triggering a deep recession. Some traders had been speculating there would be a deeper cut.

The Dow Jones industrial average fell 74.16 points, or 0.82 per cent, to close at 8,990.96. The Standard & Poor's 500 Index declined 10.42 points, or 1.11 per cent, to 930.09. But the Nasdaq Composite Index rose 7.74 points, or 0.47 per cent, to 1,657.21.

In contrast, at about 3:30pm EDT, all three indexes were rallying near session highs: The Dow was up over 230 points, or about 2.6 per cent, at 9,299 and the S&P 500 was up over 20 points, or about 2.6 per cent, at 964, while the Nasdaq was up about 46 points, or about 2.8 per cent, at 1,695.

By 3:58pm, the rally was over, with both the Dow and the S&P turning negative.

Source: Singapore Business Times - 30 Oct 2008