U.S. Stocks Turn Mixed; Goldman Report Triggers Sell-off

NEW YORK (MarketWatch) -- U.S. stocks faltered on Friday after amid reports that Goldman Sachs might trim its workforce in making annual reviews, dimming earlier optimism that came with a slew of bright profit reports.

"The sell-off in the equity market came amid rumors of a quantitative fund in trouble, while separately news that Goldman Sachs could cut its workforce by 5% is also a factor in the heavier tone," said Action Economics.

After climbing more than 100 points, the Dow Jones Industrial Average was more recently down 24.2 points at 12,354.4.

The S&P 500 fell 2.51 points to 1,349.56, with the Nasdaq Composite rose 2.69 points to 2,363.61.

A trio of blue chips -- Honeywell International Inc., Microsoft Corp. and Caterpillar Inc. -- reported financial results that beat analysts' expectations, which lifted market sentiment earlier. But investors remained cautious about the overall economy.

"The market needs further confirmation the economy is not in a recession; next week's economic data could set the tone," said Peter Cardillo, chief market economist at Avalon Partners.

With little on the economic docket Friday, the market debated whether the Federal Reserve would cut interest rates further at next week's Federal Open Market Committee gathering. Fed policymakers engineered an emergency cut of three quarters of a percentage point, or 75 basis points, earlier this week.

"Next week is heavy with data and an FOMC meeting," said Leman Brothers economist Drew Matus. "We look for mixed economic news and a 25-basis-point cut."

Of the Dow's 30 components, 16 traded lower.

Shares of Honeywell shares were recently up 4.2%. Late Thursday, the blue-chip conglomerate reported an 18% profit increase for the fourth quarter.

Shares of Microsoft rose 1% after the software giant posted an 81% surge in quarterly profit.

And Caterpillar gained 2.3% after it said fourth-quarter earnings grew about 14%.

In an interview with MarketWatch, Caterpillar CEO James Owens said he anticipates no worse than a mild U.S. recession.

On the New York Mercantile Exchange, gold futures soared to a new record high at $924.30 in electronic trading, with the benchmark contract recently up $8.20 at $914. .

In energy trading, crude-oil futures rose $1.29 to $90.70 a barrel, on hopes that the fiscal stimulus package announced Thursday will lift the U.S. economy. .

Volume on the New York Stock Exchange came to 619 million shares, and advancing stocks ran ahead of those declining about 3 to 1. On the Nasdaq, 972 million shares changed hands, with advancers topping decliners 4 to 3.

Earnings highlights

Juniper Networks impressed with its quarterly results, sending shares up 2.4%.

Shares of E-Trade Financial rose 11.8%, rallying after it outlined a plan to cut costs by $360 million this year after reporting a $1.7 billion quarterly loss.

And Harley-Davidson Inc reported a 26% drop in fourth-quarter net income, due in part to a weak U.S. economy slowing sales. Shares of the motorcycle manufacturer were off more than 2%.

Asian stocks rallied on Friday, with the Nikkei jumping 4.1% in Tokyo and the Hang Seng up 6.7% in Hong.

European markets saw more modest advances, with the French CAC 40 up 1%.

On Thursday, U.S. stocks claimed higher ground for a second straight day after the White House and the House leadership unveiled a tentative economic-stimulus package, lifting an equities market battered by worries about a recession.

By Kate Gibson