US stocks:  Shares sag as GM hits Dow, Ford warns after bell

NEW YORK - US stocks slid on Friday, as a 3 per cent drop in General Motors Corp. helped snap a four-day rally by the Dow average, while energy stocks fell as oil prices slid again.

General Motors, which in March warned its 2005 earnings would fall as much as 80 per cent below its previous forecast, fell $1.03 to $29.50 -- making it the Dow's biggest percentage loser. Deutsche Bank downgraded the stock to "sell" from "hold. "

After the closing bell, there was more gloom for the auto industry when Ford Motor Co. cut its 2005 earnings forecast, driving its shares down 6 per cent in after-hours trading.

"We're not surprised to see Ford cutting earnings estimates after GM made similar moves recently," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York, who doesn't own stock in either Ford or GM.

Ghriskey thought it could have an initial shock when the market reopens on Monday, but not "far-reaching ramifications " for the equity market.

The Dow Jones industrial average was down 84.98 points, or 0.81 per cent, to end at 10,461.34. The Standard & Poor's 500 Index was down 9.94 points, or 0.83 per cent, to close at 1,181.20. The Nasdaq Composite Index was down 19.44 points, or 0.96 per cent, to finish at 1,999.35.

Despite Friday's sell-off, stocks ended the week higher. The Dow rose 0.55 per cent for the week, while the S&P 500 advanced 0.71 per cent and the Nasdaq gained 0.73 per cent.

Oil prices continued to decline, with US light crude for May delivery settling at $53.32 a barrel, down 79 cents in a volatile session -- pulling further away from the $58.28 record hit earlier this week.

High oil prices tend to impact corporate profits and consumer spending so a fall generally helps stocks in general.

But on Friday, the positive impact was partly outweighed by slides in oil producers Exxon Mobil Corp. and ChevronTexaco Corp. Exxon, a Dow component, was down 1.4 per cent, or 84 cents, at $60.01, while ChevronTexaco, an S&P 500 member, dropped 2.1 per cent, or $1.23, to $56.69.

"The sell-off in oil is causing energy stocks to be particularly weak and that's adding some pressure," said Larry Peruzzi, senior equity trader at The Boston Co. Asset Management, a Mellon subsidiary. "We're also seeing continued selling in retail stocks after yesterday's same-store-sales came in very light. "

Retailers' shares were weak, with the S&P Retailing index down 1.1 per cent. Wal-Mart Stores Inc. fell 0.7 per cent, or 33 cents, to $48.57, a day after it warned that first-quarter earnings could fall short of its previous forecast.

AUTOS CAST SHADOW OVER MARKET

General Motors declined 0.4 per cent to $29.37 in after-hours trading. Ford extended its session losses after the bell. It ended regular trading at $11.03, down 27 cents, and fell 6 per cent, or 68 cents, after hours to $10.35.

"The entire domestic automotive sector remains under significant revenue and cost pressures, due to declining market shares impacting revenues and due to health-care costs for personnel and inflationary raw material costs impacting earnings," Ghriskey said.

"Largely this is an issue confined to the domestic automotive sector and I wouldn't expect it to have far-reaching ramifications on the overall market, after an initial shock when the market opens. "

In other stock action during the regular session, Dollar Tree Stores Inc. fell 11 per cent, or $3.01, to $25.16 and weighed on the Nasdaq 100, after the deep discounter cut its forecast for first-quarter sales.

American International Group Inc. dragged on the Dow, falling 1.7 per cent, or 88 cents, to $51.91, as pressure builds from multiple investigations facing the huge insurance company. Authorities are set to interview AIG's former chief executive and chairman Hank Greenberg next week.

Technology shares were led lower by software stocks. Borland Software Corp. plummeted 18 per cent, or $1.33, to $6.16 on Nasdaq, a day after the company cut its first-quarter outlook. J.P. Morgan on Friday lowered its investment rating on Borland to "neutral" from "overweight. "

"I think you're seeing some profit taking ahead of the weekend," said Neil Massa, senior trader at John Hancock Funds. "There were a lot of negative pre-announcements ... and oil's always going to be a factor. "

Steel companies slipped after UBS cut its second-quarter steel price forecast and said a weaker outlook could "deteriorate sentiment" on companies, including Nucor and US Steel. Nucor Corp. fell 3.5 per cent, or $2.03, to $55.27, while US Steel Corp. dropped 4 per cent, or $2.13, to $48.22.

Trucking company USF Corp. fell nearly 6 per cent, or $2.83, to $45.67, after it warned of a drop in first-quarter profit. That warning also hurt the shares of Yellow Roadway Corp., which agreed in February to buy USF. Yellow skidded 8 per cent, or $4.69, to $54.45.

Trading was moderate, with 1.32 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.52 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

Decliners outnumbered advancers on the New York Stock Exchange by about 12 to 5 and by about 2 to 1 on Nasdaq.

- REUTERS