U.S. stocks drop for third straight session as tech declines

NEW YORK —
Stocks closed with steep losses for a third straight day Friday, paced
by technology shares, which suffered from analyst downgrades and
sky-high earnings expectations.

The selling picked up in the afternoon as fears swirled regarding the possibility that Ben Bernanke might not get confirmed to a second term as Federal Reserve chairman.

The Dow Jones Industrial Average slid 216.90, or 2.1
percent, to 10,172.98, off 5.2 percent over its three-day slide. For
the week, the Dow was off 4.1 percent.

The S&P 500 Index plunged 2.2 percent to
1,091.75, off 3.9 percent for the week. The tech-heavy Nasdaq Composite
Index ended down 2.7 percent, the worst decline of the major indexes.
It was hurt in part by a 5.7 percent slide in Google,
despite the Internet giant’s surge in fourth-quarter earnings. The
company’s earnings and revenue came in well above analysts’ estimates,
but investors seemed to have been looking for more.

“Expectations have gotten elevated over the last three quarters and it becomes a very tough short-term bar to clear,” said Jeff Markunas, portfolio manager of the RidgeWorth Large Cap Core Equity Fund. “There’s been a lot of nit-picking.”

Also weighing on the tech sector: Citigroup
cut its ratings on seven semiconductor-equipment stocks, citing the
risk of a correction of perhaps 30 percent in the sector for the short
term, though a broader bullish trend remains intact.

Of the companies downgraded by Citi, the hardest hit were Entegris, off 11.9 percent; Brooks Automation, off 9.6 percent; and Applied Materials, off 7 percent.

The declines in major averages gathered some steam in late afternoon as President Barack Obama spoke at a town hall meeting regarding his plan to impose tougher
limits on big banks’ speculative activity. His proposal fueled a
213-point slide in the Dow when it was unveiled on Thursday and
continued to be a hot topic among investors during the latest trading
session.

Investors also weighed reports that some
congressional Democrats are growing skittish about confirming Bernanke
to a second term as Fed chairman.

“The chief sponsor of the economy, the Fed, will be in disarray if Bernanke doesn’t get reappointed,” said strategist Bruce Bittles, of R.W. Baird & Co. “That’s a big concern for investors right now.”

Financial bellwethers extended the previous session’s sharp losses. Goldman Sachs Group was down 4.2 percent, while Bank of America, which focuses more on traditional banking, was off 3.7 percent.

General Electric rose 0.6 percent after reporting fourth-quarter earnings above analysts’ estimates and forecasting a return to growth in 2011. McDonald’s,
meanwhile, climbed 0.3 percent. The fast-food giant’s fourth-quarter
earnings rose 23 percent as same-store sales climbed across all its
regions.

American Express fell 8.5 percent despite a tripling in its quarterly net income. The report topped Wall Street
estimates, but fell short of investor expectations. The market may have
already priced in the improvements, anticipating the credit card
issuer’s strengthening, analysts said.

In other markets Friday, crude-oil prices fell below $75 per barrel. Gold futures also slipped.

The dollar weakened against both the euro and the
yen, while Treasurys were little changed. The 10-year note was recently
off 2/32 to yield 3.601 percent.

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