GE Earnings Drop Spooks Markets

There are always people trying to call a bottom during a bear market like the one we are in, but as hard as they try, it seems to be very elusive indeed. General Electric’s (GE: 32.31 -4.44 -12.08%) nearly 6% drop in profit at $4.3 billion, or 43 cents per share, from $4.57 billion, or 44 cents per share, last year, and below the 50-53 cents per share forecast by GE, sent already jittery investors running to dump stocks and sending GE’s shares down by up to 12%. GE also lowered profit forecasts for the next quarter to 53-55 cents per share.
GE said the decline was due to troubles in its financial services business which fell by 28%, due to the erosion in commercial finance. One of the main causes according to GE, was the Bear Stearns (BSC: 10.06 -0.14 -1.37%) fiasco which made it very difficult for them to complete asset sales as planned, and that it was too late in the quarter to give a warning.
Industrial earnings for GE were up substantially, and the fact that around half of their earnings come from overseas helped balance out the problems they had with their financial unit. Investors were not convinced though, and think GE’s business may be suffering in more than just the financial sector.
Since GE is sometimes considered a bellwether of big companies, this unexpected drop in profit sent stocks reeling across the board as investors are once again reminded that the economy may have a long road to recovery.