- The Washington Times - Friday, January 20, 2006

NEW YORK (AP) — Lackluster earnings reports from General Electric Co. and Citigroup Inc. and fresh concerns about Google Inc. sent stocks plunging yesterday, giving the Dow Jones Industrial Average its biggest single-day percentage drop in nine months. The major indexes each lost more than 2 percent this week.

Google’s stock price plunged below $400 for the first time in two months as a brewing battle with the Bush administration compounded investor worries about the online search engine leader’s upcoming fourth quarter earnings report.

The company’s shares dropped $36.99, or 8.5 percent, to close at $399.46 on the Nasdaq Stock Market. That marked Google’s lowest closing price since Nov. 16 and capped the stock’s worst week since its ballyhooed initial public offering 17 months ago.

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 at Schaeffer’s Investment Research.

“The ramp up we had into earnings let you know that people were expecting big things,” Mr. 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. It was the largest one-day decline since April 15, when the index fell 1.9 percent. It was also the biggest one-day point drop since the Dow lost 307.29 on March 24, 2003.

Broader indices 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.

Bonds were little changed, with the yield on the 10-year Treasury note slipping to 4.35 percent from 4.37 percent late Thursday. The dollar was mixed against other major currencies in European trading, while gold prices edged lower.

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 to add 37.5 cents to $9.28 per 1,000 cubic feet.

Google’s market value has plummeted by 14 percent during the last week, wiping out $20 billion in shareholder wealth.

The selloff began Wednesday after Google’s biggest rival, Yahoo Inc., released fourth-quarter earnings that fell below analysts’ estimates.

Yahoo’s shortfall raised concerns that Google’s earnings report, due out Jan. 31, won’t be as rosy as Wall Street anticipated earlier this month, when the company’s shares surged as high as $475.11.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 arms dispute. Meanwhile, a tempered outlook from Motorola Inc. also disappointed investors.

Optimism that the Federal Reserve would soon end its string of interest rate increases 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 yesterday’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 this week’s earnings data were 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.

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