NEW YORK – Earnings reports from Citigroup Inc. and General Electric Co. gave Wall Street a few reminders that there are still some quicksand pits in the financial system.
Although both companies beat analysts’ expectations for the first quarter, the stock market fluctuated Friday as investors focused on Citigroup’s continuing struggles with loan losses and the sharply lower profits at GE’s large finance arm.
Citigroup was the fourth bank in a week with news that pointed toward a budding recovery in the banking industry. But the company, echoing comments from JPMorgan Chase & Co. on Thursday, said loan losses are expected to continue in the months ahead.
GE, meanwhile, said its first-quarter earnings dropped 36 percent as sales and profits shrank at its GE Capital financial division.
The news wasn’t bad enough to motivate investors to collect some profits from Wall Street’s five-week-old rally. Kent Engelke, chief economic strategist at Capitol Securities Management, said the fact that Citi and GE surpassed the market’s forecasts did placate investors.
“If these companies didn’t meet or exceed these expectations, we would have gotten killed,” he said.
Wall Street has shown resilience in the first big week of first-quarter earnings reports, weathering disappointments from chip maker Intel Corp. and Google Inc. While investors weren’t happy with Friday’s news, they weren’t caving to uncertainty as they did the first two months of the year, when heavy selling brought the major indexes to 12-year lows.
In midday trading, the Dow Jones industrial average rose 21.83, or 0.3 percent, to 8,147.26.
The Standard & Poor’s 500 index added 4.20, or 0.5 percent, to 869.50, while the Nasdaq composite index fell 3.03, or 0.2 percent, to 1,667.41.
Wall Street’s rally began in early March after Citigroup reported it had operated at a profit during the first two months of the year. A string of more upbeat economic and earnings data gave the rally momentum, but, as often happens during earnings season, the market has stumbled when companies have unsettling news — as Citigroup and GE did on Friday.
And while Wells Fargo & Co., Goldman Sachs Group Inc. and JPMorgan Chase have all reported profits that surpassed expectations, some of those gains came on trading activity that’s not expected to continue. And, the companies that depend heavily on loan business are still seeing borrowers defaulting because of the recession.
“I think the response is guarded,” said Joseph Tatusko, chief investment officer at Westport Resources Management. “There are waves of defaults and credit issues that have yet to come on shore.”
Citigroup reported a quarterly loss of just under $1 billion, less than analysts expected. A year ago, the bank suffered a loss of more than $5 billion. Its shares slipped nearly 4 percent, falling 15 cents to $3.86.
Two other major banks, Bank of America Corp. and Morgan Stanley, will report results next week.
GE rose 38 cents to $12.65.
Other earnings reports brought little encouragement. Mattel Inc., the largest U.S. toymaker, said weak overseas sales and cautious orders from retailers led to a wider loss than expected. Still, shares jumped 15 percent, adding $1.95 to $14.98.
Mobile phone maker Sony Ericsson posted a $387 million loss and said it would cut an additional 2,000 jobs, while Toshiba Corp., Japan’s top chipmaker, warned that its loss for the last fiscal year will be bigger than expected.
Investors have been cautious this week, mindful of how poor earnings reports could easily send the market reeling. Stocks dipped earlier this week on poor retail sales and an unexpected drop in wholesale prices, but better-than-expected earnings reports from JPMorgan and Nokia Corp. helped the market snap back. On Thursday, stocks closed at their highest level in more than two months.
In other trading, the Russell 2000 index of smaller companies rose 3.73, or 0.8 percent, to 477.61.
Advancing issues outpaced decliners by about 4 to 3 on the New York Stock Exchange where volume came to 876 million shares.
Bond prices dipped, sending the yield on the 10-year Treasury note up to 2.92 percent from 2.83 percent.
Light, sweet crude added 60 cents to $50.58 a barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average rose 1.7 percent. Britain’s FTSE 100 rose 1.0 percent, Germany’s DAX index gained 1.5 percent, and France’s CAC-40 rose 1.8 percent.
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