General Electric's shares decline as stocks tumble

US stocks tumbled, recording a fifth straight losing week, after Philip Morris Cos.

and Wyeth reduced profit forecasts and a pair of Wall Street analysts lowered ratings on General Electric Co.

The Standard & Poor's 500 Index neared its largest quarterly loss since the 1987 stock-market crash, reflecting investor concern that corporate earnings are rebounding more slowly than analysts had expected. The S&P 500 and Dow Jones Industrial Average had their biggest daily losses in more than three weeks.

"Ultimately, the market responds to earnings," said Darcy MacLaren, director of equity research and a money manager at Safeco Asset Management, which oversees US$30 billion in Seattle.

"You keep seeing earnings misses because the economy isn't growing as fast as anticipated."The S&P 500 fell 27.58, or 3.2 percent, to 827.37. General Electric, Philip Morris and Wyeth accounted for 15 percent of the loss. The Dow declined 295.67, or 3.7 percent, to 7,701.45. The NASDAQ Composite Index dropped 22.45, or 1.8 percent, to 1,199.16.

For the week, the S&P 500 lost 2.1 percent, the Dow 3.6 percent and the NASDAQ 1.8 percent. The benchmarks' last weekly gains came Aug. 23.

The S&P 500's 16 percent decline this quarter would be the index's largest since a 23 percent plunge during the fourth quarter of 1987, which included that year's October crash. Monday is the quarter's final trading day.

Analysts surveyed by Thomson First Call estimate S&P 500 companies' third-quarter earnings will grow 7.3 percent, down from the 16.6 percent gain anticipated at the beginning of the quarter.

A gauge of consumer confidence fell for a fourth month in September, underscoring investor concern that the economic recovery is stalling. The University of Michigan's confidence index dropped to 86.1 from 87.6 in August.

"Repeated shocks to the US economy are delaying the onset of a full-fledged recovery," Merrill Lynch & Co.'s chief economist, Bruce Steinberg, wrote in a note to clients.

Steinberg cut his forecast for S&P 500 earnings to US$45 from US$46 for this year and to US$52 from US$55 for 2003 based on a expectations for economic growth at 2.5 percent in the next two quarters. He had expected growth of 3.5 percent and 4 percent in the last quarter of this year and first quarter of next year.

Steinberg blamed stock-market declines and the threat of war with Iraq for low investor confidence and higher oil prices, which he said will crimp economic growth over the next two quarters.

Investors pulled money out of stock mutual funds for the sixth week in a row, with US$4.1 billion more flowing out of equity funds than was added during the week ended Wednesday, according to AMG Data Services.

More than two stocks fell for every one that rose on the New York Stock Exchange and Nasdaq Stock Market. Some 1.49 billion shares traded on the Big Board, 3.9 percent below the three-month daily average.

Philip Morris sank US$4.87, or 11 percent, to US$37.86. The largest tobacco company said it will increase marketing by as much as US$300 million as discounts and promotions failed to keep smokers from switching to lower-priced brands. Profit excluding some costs will rise between 3 percent and 5 percent this year, down from a July forecast of at least 9 percent.

RJ Reynolds Tobacco Holdings Inc., the second-biggest US cigarette maker, fell US$6.39, or 13 percent, to US$40.16.