NEW YORK — Wall Street has again succumbed to a disheartening reality: The recession is taking a heavy toll on U.S. companies.
Stocks closed sharply lower Thursday on more bad news about earnings and ever-increasing worries about the banking industry.
The major indexes, which plunged and then soared in the first two trading days of the week, ratcheted up and down during the course of the session; the Dow Jones industrial average fell as much as 271 points, came close to breaking even and then slumped before closing down 105.
“We’re seeing a little bit of increase in volatility because things have not gotten much better,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group.
Microsoft set the tone for the day and made clear more pain was to come before an elusive economic recovery would emerge.
The company surprised investors Thursday morning by reporting its fiscal second- quarter earnings early — and the news was not good.
The software giant posted an 11 percent drop in profit and said it will slash 5,000 jobs over the next 18 months.
Uneasiness about financial companies still plagues investors, and many bank stocks took another beating Thursday. Quarterly financial reports showing steep profit declines and big loan losses have investors worried that the financial crisis is far from over and that the government’s efforts to prop up banks might not be enough to prevent a major failure.
The Dow fell 105.30, or 1.28 percent, to 8,122.80.
Broader indexes recovered some of their losses but still showed big drops. The Standard & Poor’s 500 index fell 12.74, or 1.52 percent, to 827.50. The technology-heavy Nasdaq composite index dropped 41.58, or 2.76 percent, to 1,465.49 after the Microsoft news.
The Russell 2000 index of smaller companies fell 13.91, or 3.05 percent, to 442.85.
“There are still problems at some of the banks, which is evident by their stock price deteriorating, which is overhanging the whole economy,” Fullman said. “We need to see that there’s confidence in the banks. They’re a crucial piece to most businesses, and they’re a crucial part of the economy.”
Asian stock markets fell today, with Japan’s benchmark Nikkei 225 losing more than 3 percent amid grim news about Microsoft and Sony, which projected its first annual net loss in 14 years. Australia’s main index tumbled more than 4 percent, Shanghai’s benchmark was down 0.3 percent, and Singapore’s stock measure lost 0.5 percent.
