Down day, down week on Wall Street

Weaker-than-expected results from Dow component and a sharp drop in a consumer sentiment measure drag down stocks.

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By Alexandra Twin, senior writer

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NEW YORK ( -- Stocks tanked Friday after General Electric's weaker-than-expected profit report exacerbated fears about how badly the economic slowdown is going to impact corporate earnings.

Also hurting stocks Friday: news that the University of Michigan's initial April consumer sentiment index plunged to the worst level in 26 years.

The Dow Jones industrial average (INDU) lost 2% Friday and 2.25% for the week.

The broader Standard & Poor's 500 (SPX) index gave up 2% Friday and 2.7% for the week. The Nasdaq composite (COMP) tumbled 2.6% Friday and 3.4% for the week.

Treasury prices slumped, boosting the corresponding yields, as investors poured money into the comparatively safer haven of government debt. The dollar fell versus other major currencies.

"GE was definitely the main driver today," said John Davidson, president and CEO at PartnerRe Asset Management. "It's pretty heavily followed, it has a lot of diverse businesses and the report was really a surprise."

GE (GE, Fortune 500), often seen as a proxy for the economy due to the breadth of its businesses, reported lower first-quarter sales and earnings that missed estimates as the sluggishness plaguing the nation hurt its financial services business. The company, a Dow component, also cut its second-quarter and full-year 2008 profit forecast. Shares fell nearly 13%.

"We're in a period where we need enough time to pass so all the negatives that are being held over our heads can be exposed," said James King, chief investment officer at National Penn Investors Trust.

"The most difficult time for the market is when you know something is wrong but you don't know how bad it's going to get," he said. "Something like GE brings all of that to a head."

The company's poor results played into fears that the weakness in the economy is going to have a worse impact on corporations than has been anticipated.

"My guess is that earnings forecasts for 2008 are still pretty high relative to the economic reality," Davidson said. "Until there is a realization of that, stocks are going to continue to get knocked around."

Next week brings a big batch of financial sector earnings, with Merrill Lynch (MER, Fortune 500) and Citigroup (C, Fortune 500) among the companies due to report abysmal results. (Full story).

Economic reports are due next week on retail sales, business inventories, producer prices and consumer prices, housing and manufacturing.

Airlines. AMR (AMR, Fortune 500)'s American Airlines canceled an additional 595 flights, or 25% of its schedule, Friday, stranding thousands of passengers. American has canceled about 3,100 flights this week due to safety concerns. AMR stock lost 4%.

Frontier Airlines Holdings (FRNT) filed for Chapter 11 bankruptcy protection, although it said all flights will operate as scheduled. The low-fare carrier is facing a liquidity crunch after the the company that processes most of its credit card transactions increased the amount of money it keeps from the sale of Frontier tickets. Shares fell almost 69% in unusually active Nasdaq trade.

On an up note for the industry, the pilots union at Delta Air Lines (DAL, Fortune 500) agreed on contract revisions that could help move along the company's merger with Northwest Airlines (NWAC), a deal that has been in the works for several months.

Other company news. Washington Mutual (WM, Fortune 500) shares lost over 4% in active trade Friday after a Goldman Sachs analyst said the mortgage lender could see an additional $14 billion in loan losses this year.

A variety of big technology shares fell, including Microsoft (MSFT, Fortune 500), Intel (INTC, Fortune 500), Oracle (ORCL, Fortune 500), Apple (AAPL, Fortune 500) and Cisco Systems (CSCO, Fortune 500).

Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 3 to 1 on volume of around 1.26 billion shares. On the Nasdaq, decliners topped advancers by over 3 to 1 on volume of 1.91 billion shares.

Commodity prices. U.S. light crude oil for May delivery rose 3 cents to settle at $110.14 a barrel on the New York Mercantile Exchange.

Gas prices set another record at $3.365 a gallon, the AAA reported.

COMEX gold for June delivery fell $4.80 to settle at $927 an ounce.

Other markets. The dollar fell versus the euro and the yen.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.47% from 3.54% late Thursday. Bond prices and yields move in opposite directions. To top of page

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