Stocks open lower after BofA, Citi and GE beat estimates but still show some weaknesses

Stocks open lower after latest earnings reports

NEW YORK — More mixed signals on the economy and earnings reports are sending stocks lower in early trading.

Bank of America Corp. and Citigroup Inc. became the latest banks to report big second-quarter profits on Friday, but both showed continued weakness in loan portfolios. General Electric Co. beat earnings forecasts but its revenues came up short.

Investors have been keenly focused on earnings reports this week, hoping to find more concrete signs of life in the economy and validation that a huge rally in stocks this spring was justified.

Strong earnings from four of the largest U.S. banks have been encouraging, but there is still evidence that the recession’s grip hasn’t eased as much as hoped.

BofA, which has struggled more than some of its peers from loan losses, beat Wall Street’s estimates just as Goldman Sachs Group Inc. and JPMorgan Chase & Co. did earlier this week. However its profit was down from a year earlier as losses from delinquent loans continued to climb.

Citigroup, another troubled bank, surprised Wall Street with a $3 billion profit instead of the big loss analysts had expected, but results were boosted by the sale of a majority stake in its Smith Barney brokerage.

GE’s earnings fell 49 percent on losses at its financial unit and ongoing weakness in its industrial businesses but still topped forecasts. Revenue of $39.1 billion came in $3 billion below forecasts. Those reports followed mixed results from tech giants Google Inc. and IBM Corp. late Thursday.

Going in to Friday’s session, major market indicators are up about 7 percent for the week. The advance in stocks, however, has been jagged, with modest gains coming after big surges.

“We’re seeing some very good news all in all,” said Kent Engelke, chief economic strategist at Capitol Securities Management. “I also believe the market is ahead of itself. I think we’re getting the classic case of buy on rumor and sell on fact.”

In early morning trading, the Dow Jones industrials fell 24.04, or 0.3 percent, to 8,687.78. The Standard & Poor’s 500 index fell 4.49, or 0.5 percent, at 936.25, while the Nasdaq composite index lost 10.66, or 0.6 percent, to 1,874.37.

Aside from the onslaught of earnings reports, investors got an upbeat reading on the housing market.

The Commerce Department said construction of new homes and apartments jumped 3.6 percent in June to 582,000, the highest level in seven months and better than the 530,000 economists expected. It was the second straight increase after a record low in April.

Building permits, an indicator of future construction activity, climbed 8.7 percent to an annual rate of 563,000, well above the 520,000 forecast by analysts.

The positive report did little to stoke buying, however, following four straight days of gains in the Dow and the S&P 500 index. Stocks rallied Thursday after strong earnings from JPMorgan Chase and as investors pushed into technology stocks ahead of IBM and Google’s results. The tech-heavy Nasdaq advanced for the seventh straight day, rising 1.2 percent, and closed at its highest level since October.

This week’s forward move in the market has temporarily halted a monthlong slide that came as investors worried the 40 percent jump in stocks in March and April, based on hopes that the economy was turning around, had been unwarranted.

After the market closed on Thursday, Google said its second-quarter profit was its biggest since it went public five years ago. However, investors were concerned that revenue growth continued to decelerate. It was Google’s second straight quarter of single-digit revenue growth.

IBM, meanwhile, reported revenue below expectations, but its profit continued to improve. The computer and technology firm’s second-quarter results were strong enough that it increased its full-year earnings forecast.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.61 percent from 3.58 percent late Thursday.

Oil prices rose $1.24 to $63.26 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies, while gold prices rose.

In other trading, the Russell 2000 index of smaller companies fell 3, or 0.6 percent, to 519.02.

About three stocks fell for every two that rose on the New York Stock Exchange where volume came to 348.7 million shares compared with 159.1 million shares at the same time a day earlier.

Overseas, Japan’s Nikkei stock average rose 0.6 percent. In afternoon trading, Britain’s FTSE 100 gained 0.7 percent, Germany’s DAX index rose 0.5 percent, and France’s CAC-40 gained 0.8 percent.