The bubble was bound to burst.
Early in the week stocks on the New York Stock Exchange and the Nasdaq market gained as companies reported better-than-expected earnings.
Of the 278 companies in the S&P 500 that have reported third-quarter earnings, 158 of them, or 57 percent, have beaten analysts’ expectations, including Chicago-based Sears, Roebuck and Co. Only 79 companies, or 28 percent of those reporting, have fallen short of forecasts.
Sears beat Wall Street estimates by 20 percent when it reported it had earned 91 cents a share, 16 cents better than the Street’s estimate. The market, however, didn’t reward Sears. Its stock finished the week at $48, up only 12 cents.
General earnings optimism evaporated Thursday after General Motors Corp. reported that its North American car operations had fallen back into the red. GM’s shares fell $1.75 Friday, to $41.38, after a plunge of $3.75 Thursday.
Analysts at Donaldson, Lufkin & Jenrette Securities Corp. and Salomon Brothers Inc. lowered their investment opinions on GM, which reported third-quarter earnings of 40 cents a share, 8 cents short of analysts’ expectations.
“GM dashed everybody’s hopes” about earnings, said Christopher Willox, a trader at BT Brokerage in New York.
There is a growing feeling that “earnings can’t change the focus of the market,” which is “still on any economic data that comes out,” he said.
