NEW YORK (AP) - Investors sent stocks slightly lower Friday as earnings reports from Citigroup and General Electric brought reminders of weaknesses in the financial system.
Both companies reported better-than-expected results but investors focused on Citigroup’s continuing struggles with loan losses and sharply lower profits at GE’s large finance arm.
The market has been becoming more optimistic about a recovery in the economy but has been receiving mixed signals from corporate earnings reports that have started to flow in this week.
Stocks have soared off of 12-year lows since early March, giving the market is best four-week showing since 1933, but any chance of that rally continuing depends heavily on investors getting reassurances that the financial system is getting past the worst of a debilitating freeze in lending.
In midmorning trading, the Dow Jones industrial average fell 14.25, or 0.2 percent, to 8,111.18. The Standard & Poor’s 500 index fell 1.69, or 0.2 percent, to 863.61, while the Nasdaq composite index fell 13.03, or 0.8 percent, to 1,657.41.
Results from major banks over the past week have brought some encouraging news, but the market has yet to be convinced that a full recovery has taken hold.
Wells Fargo & Co., Goldman Sachs Group Inc. and JPMorgan Chase & Co. have all reported profits that surpassed expectations thanks partly to historically low interest rates and a spike in mortgage refinancing.
Some investors worry however that the benefits could be fleeting and that worsening loan losses could cause more damage later. Two other major banks, Bank of America Corp. and Morgan Stanley, will report results next week.
“I think the response is guarded,” said Joseph Tatusko, chief investment officer at Westport Resources Management. “There are waves of defaults and credit issues that have yet to come on shore.”
Citigroup reported a quarterly loss of just under $1 billion, less than analysts expected. A year ago, the bank suffered a loss of more than $5 billion. Its shares fell 6 percent.
General Electric’s first-quarter earnings dropped 36 percent, weighed down by a decline in sales and waning profits at GE Capital. Shares fell 3 cents to $12.24.
Other earnings reports brought little encouragement. Mattel Inc., the largest U.S. toymaker, said weak overseas sales and cautious orders from retailers led to a wider loss than expected.
Mobile phone maker Sony Ericsson posted a $387 million loss and said it would cut an additional 2,000 jobs, while Toshiba Corp., Japan’s top chipmaker, warned that its loss for the last fiscal year will be bigger than expected.
Investors have been cautious this week, mindful of how poor earnings reports could easily send the market reeling. Since March 9, the Dow has risen 24 percent, while the S&P 500 is up 28 percent.
Stocks dipped earlier this week on poor retail sales and an unexpected drop in wholesale prices, but better-than-expected earnings reports from JPMorgan and Nokia Corp. helped the market snap back. On Thursday, stocks closed at their highest level in more than two months.
In other trading, the Russell 2000 index of smaller companies fell 0.76, or 0.2 percent, to 473.12.
Declining issues just narrowly outpaced advancers on the New York Stock Exchange where volume came to 655.2 million shares.
Bond prices dipped, sending the yield on the 10-year Treasury note up to 2.88 percent from 2.83 percent.
Light, sweet crude added 39 cents to $50.37 a barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average rose 1.7 percent. In afternoon trading, Britain’s FTSE 100 was up 1.0 percent, Germany’s DAX index was up 0.9 percent, and France’s CAC-40 was up 1.7 percent.
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