NEW YORK (CNN/Money) -
U.S. stock markets closed out a rough week with a steep selloff Friday, as investors bailed out of a variety of sectors on worries that slower corporate profit growth in the second half will hurt stock valuations.
Those concerns are likely to be revived next week, when 147 members of the S&P 500 issue their earning reports, including Dow components Exxon Mobil, American Express, DuPont and Boeing. (For a look at these and other key reports due next week, click here.)
On top of that, there have been concerns about a potential terrorist attack disrupting next week's Democratic National Convention in Boston. The four day convention begins Monday.
On Friday, the Nasdaq Composite (down 39.97 to 1,849.09, Charts) fell 2.1 percent, closing at its lowest level since October 2, 2003, when it ended the session at 1836.22.
The S&P 500 (down 10.64 to 1,086.20, Charts) shed about 1 percent, closing at a more than 2-month low. The Dow Jones Industrial average (down 88.11 to 9,962.22, Charts) lost 0.9 percent to close at an almost 2-month low.
For the week, the Nasdaq lost 1.8 percent, the S&P 500 lost 1.4 percent and the Dow lost 1.75 percent.
It was the sixth consecutive weekly decline for the S&P 500, the fifth for the Dow and the fourth for the Nasdaq.
Microsoft, Amazon and Coca-Cola led the list of big-name companies reporting disappointing earnings or forecasts in the last day.
"The earnings are coming out as expected, but these days there's a 'what have you done for me lately?' attitude in the market," said Ram Kolluri, chief investment officer at GlobalValue Investors.
Second-quarter earnings overall have been very strong so far, but with expectations for second-quarter strength baked into the market already, analysts say investors are focused on the third quarter and full-year estimates, which have been less bullish. The many mixed or uninspiring forecasts have served to feed the fear that profit growth could slow substantially between now and the end of the year.
Many Wall Streeters are concerned that without the perception of blockbuster future earnings, there may not be much incentive for stocks to move out of their six-month range.
Kolluri said that there was an apprehensive feeling in the market about how rising interest rates and lower corporate profits are going to impact stock valuations. Other concerns include the growing realization among investors that oil prices are likely to remain around $40 a barrel for some time, he said.
"I do think this is a lull in the market rather than a new bear trend," Kolluri said. "One month does not a trend make."
Microsoft (MSFT: down $0.97 to $28.03, Research, Estimates) and Amazon.com (AMZN: down $5.84 to $39.98, Research, Estimates) both reported quarterly results late Thursday that grew from the previous year, but missed analysts' estimates. In addition, tech leader Microsoft issued a mixed forecast for the current quarter.
Microsoft shares lost 3.3 percent and topped the Nasdaq's most-actives list. Amazon shares lost 12.75 percent.
The two companies weren't alone in disappointing investors.
Coca-Cola (KO: down $3.80 to $45.17, Research, Estimates) reported improved earnings from a year earlier that edged past estimates, largely due to the benefit of a weak dollar. But the company also reported unit case volume, a key factor in beverage industry earnings, grew 1 percent, when analysts thought it would grow 3 percent to 4 percent. The soft drink leader also said its global businesses were suffering from steep competition.
Following the news, Sanford Bernstein downgraded Coke to "market perform" from "outperform," while a number of other brokerages trimmed their earnings forecasts for the company. Shares fell 7.75 percent.
Foundry Networks (FDRY: down $1.30 to $10.32, Research, Estimates) reported earnings of 11 cents per share, 3 cents short of estimates and 2 cents less than it earned a year earlier. The company also boosted third-quarter earnings, but investors focused on the negative, sending shares down more than 11 percent and pressuring a slew of networkers.
DoubleClick (DCLK: down $1.92 to $5.06, Research, Estimates) reported earnings late Thursday that fell from a year earlier and missed estimates. The online marketing company also warned that third-quarter and full-year earnings would miss expectations. Piper Jaffrey and CIBC World Markets both downgraded the stock Friday. Shares fell 27.5 percent.
Market breadth was very negative. On the New York Stock Exchange, losers beat winners by more than two to one on volume of 1.33 billion shares. On the Nasdaq, decliners beat advancers by eleven to four on volume of 1.69 billion shares.
"There are a lot of good things happening right now, but the market continues to focus on Iraq, interest rates, the presidential election, and particularly right now, the high-profile earnings misses," said Michael Carty, principal at New Millennium Advisors.
Among commodities markets, NYMEX light sweet crude oil futures added 31 cents to settle at $41.67 a barrel. COMEX gold fell $4.80 to settle at $390.50 an ounce.
Treasury prices inched higher, pushing the 10-year note yield down to 4.43 percent from 4.45 percent late Thursday. The dollar gained versus the yen and euro.