NEW YORK (AP) — Stocks slumped for a second straight day Friday as investors worried that the economy, though perhaps not as troubled as feared, is only getting worse.
The Commerce Department said gross domestic product, the widely followed measure of the economy, shrank at a 3.8 percent pace in the final three months of 2008. That compared with a 0.5 percent decline the previous quarter.
Friday’s reading was much better than the 5.4 percent drop economists expected. Still, the figure could be revised lower in the months ahead — and many analysts believe the economy has been contracting in early 2009 at an even faster pace.
“What happened in the fourth quarter is really old news,” said Sung Won Sohn, a professor of economics at California State University, Channel Islands. “People are focusing on what is going to happen in the first half and it does not look good at all.”
Downbeat corporate forecasts and reports of thousands of new layoffs are making it difficult for investors to see any end to the recession, he said.
Exxon Mobil Corp. said Friday it surpassed its own record for annual earnings by a U.S. company last year, but saw a big drop in profit during the fourth quarter. Chevron Corp.’s fourth-quarter results also suffered from the late-2008 plunge in oil prices.
Meanwhile, consumer products company Procter & Gamble Co. said its fourth-quarter quarter profit jumped 53 percent after selling its Folgers coffee business, but sales dipped 3 percent on weakening demand for its products — which include Tide detergent, Olay skin cream and Crest toothpaste.
Declining sales are also hitting Honda Motor Co. hard — the Japanese automaker slashed its 2009 profit target by more than half as its earnings dropped 90 percent in the latest quarter.
Also Friday, Japanese electronics maker NEC Corp. said it will cut 20,000 jobs worldwide as it reported a $1.46 billion loss for the fourth quarter. The cuts are in addition to big staff reductions announced earlier this week by Starbucks Corp., Eastman Kodak, Allstate Corp. and others.
In midday trading, the Dow Jones industrial average fell 106.25, or 1.30 percent, to 8,042.76. The Standard & Poor’s 500 index fell 11.95, or 1.41 percent, to 833.19, and the Nasdaq composite index fell 20.98, or 1.39 percent, to 1,486.86.