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October 24, 2012

Results rattling investors

NEW YORK — Nobody was expecting this round of corporate financial reports to be great. But underwhelming results — particularly revenue, which offers a read on the economy — are still rattling investors.

The Dow Jones industrial average plunged Tuesday to its lowest level in nearly seven weeks. Big-name companies reported weak quarterly revenue and lowered their forecasts for the rest of the year.

Since the end of the Great Recession, investors have rewarded companies for increasing profit, even if revenue growth has been unimpressive. And companies have turned in three years of growing profit.

But companies can squeeze profit many ways, including cost-cutting, and revenue offers a truer read on customer demand. That is on investors’ minds as the world economy lumbers along.

And even the profit streak may be over. Financial analysts predicted that profit would fall at S&P 500 companies for July through September compared with the year before, which would end a three-year streak.

On Tuesday, the Dow sank as much as 262 points, or roughly 2 percent, before ending the day down 243.36 points to 13,102.53. The decline was the Dow’s third-steepest this year.

Other indexes also fell sharply. The Standard & Poor’s 500 index shed 20.71 points to 1,413.11, and the Nasdaq composite index lost 26.50 points to 2,990.46. The Nasdaq hadn’t closed below 3,000 since Aug. 6.

Companies of all stripes signaled that the economy is far from healed, and that demand is weaker than a year ago. Revenue fell compared with a year ago at DuPont, 3M, UPS and Xerox.

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