MCD McDonalds Corp

By Sara Sjolin, MarketWatch , Ryan Vlastelica

Dow on track for a third straight weekly decline

U.S. stocks traded lower on Friday after the latest batch of key corporate earnings raised new concerns about whether the pace of economic activity was justifying equity valuations.

General Electric Co.(GE) sank 1.8% to $28.56 after the industrial conglomerate reported weaker-than-expected revenue growth (http://www.marketwatch.com/story/ge-revenue-misses-expectations-while-profit-beats-2016-10-21) in its latest quarter. The stock was on track for its biggest one-day decline since early September and was trading at levels last seen in February.

"When a bellwether like GE gives a tepid--if not grim--outlook for economic activity, investors are going to react to that, and pretty negatively," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

A 2.4% decline in shares of Travelers Cos. Inc.(TRV) also was weighing on the Dow industrials.

A rally for Microsoft Corp. (MSFT), which reported better-than-expected results thanks to its cloud-computing division (http://www.marketwatch.com/story/the-secrets-behind-microsofts-big-profit-beat-and-dot-com-boom-share-price-2016-10-20), was attempting to offset those large-cap declines. Microsoft shares popped 4.7% to $59.96, and earlier hit a record.

The Dow Jones Industrial Average lost about 34 points, or 0.2%, to 18,127, while the S&P 500 index lost 2 points, or 0.1%, to 2,139. The Nasdaq Composite Index , which is heavily weighted with tech stocks and was supported by Microsoft's rally, rose 12 points, or 0.3%, at 5,254.

In addition to Microsoft, McDonald's Corp.(MCD) also reported better-than-expected (http://www.marketwatch.com/story/mcdonalds-shares-rise-after-earnings-beat-2016-10-21) third-quarter earnings, sending the stock up 2.6% to $113.46. The two stocks were by far the biggest boosts on the Dow for the day.

"Despite a couple of good reports, we're in the midst of another earnings season that is hardly painting a bright picture," Luschini said. "Having another quarter where profits contract is not an underpinning for stocks to advance, and the market is searching for, if not demanding, a catalyst to move higher. At the moment, one is lacking."

S&P 500 companies are expected to post their sixth straight quarter of declining earnings (http://www.marketwatch.com/story/5-things-to-expect-this-earnings-season-2016-10-07) this quarter, according to FactSet data.

Read:The stock market is caught deep in 'no man's land' (http://www.marketwatch.com/story/the-stock-market-is-caught-deep-in-no-mans-land-2016-10-20)

While the major indexes had recovered off their lows of the day, the Dow remained on track for its third straight weekly loss. Both the S&P 500 and Nasdaq were on track to break their own two-week losing streak.

On Thursday, U.S. stocks closed lower (http://www.marketwatch.com/story/us-stock-futures-in-holding-pattern-after-debate-and-ahead-of-big-data-dump-2016-10-20), partly driven by a 2.3% slide for oil futures . Crude extended its weakness on Friday (http://www.marketwatch.com/story/strong-dollar-remarks-by-rosneft-chief-weigh-on-oil-2016-10-21), down 0.1% at $50.59 a barrel.

While oil was only slightly negative on the day, energy stocks fell sharply, with the S&P energy sector down 1.1%. Late Thursday, Schlumberger Ltd. reported weak third-quarter results (http://www.marketwatch.com/story/schlumberger-profit-falls-sharply-2016-10-20-174854654), sending its stock down 3.8% to $79.85 on Friday.

Among other big movers, Reynolds American Inc.(RAI) soared 14% to $53.63 after British American Tobacco PLC(BATS.LN) (BATS.LN) offered to buy the remaining stake in its U.S. peer it doesn't already own for $47 billion (http://www.marketwatch.com/story/bat-in-47-billion-offer-for-reynolds-stake-2016-10-21). Reynolds confirmed it had received the offer.

PayPal Holdings Inc.(PYPL) jumped 9.2% to $43.77 after its earnings late Thursday met expectations.

On a downbeat note, Advanced Micro Devices Inc.(AMD) slumped 4.8% to $6.62 after the chip maker saw its loss widen in the third quarter (http://www.marketwatch.com/story/advanced-micro-devices-slides-after-posting-wider-quarterly-loss-2016-10-20).

Like GE, Honeywell International Inc.(HON) sales also fell short of forecasts (http://www.marketwatch.com/story/honeywell-sales-fall-short-of-estimates-2016-10-21), though the stock rose 0.7% to $108.94.

Qualcomm Inc.(QCOM) rose 2.5% to $69 in the wake of a Bloomberg report that its bid to takeover NXP Semiconductors NV (NXPI) was nearing its final stages (http://www.bloomberg.com/news/articles/2016-10-20/qualcomm-said-to-be-near-final-nxp-deal-may-announce-next-week).

Fed speakers: Fed Gov. Daniel Tarullo said that academics (http://www.marketwatch.com/story/feds-tarullo-wants-academics-to-focus-more-on-bank-liabilities-rather-than-capital-2016-10-21) at business and law schools should place more emphasis on the liability side of the balance sheets of financial firms, rather than capital.

San Francisco Fed President John Williams is scheduled to give the keynote speech at the Federal Home Loan Bank's 2016 Member Conference at 2:30 p.m. Eastern Time.

Other markets: Asia markets closed mostly lower (http://www.marketwatch.com/story/asian-markets-lower-as-odds-of-fed-rate-hike-increase-2016-10-20) on the higher expectations of Fed tightening. Trading was suspended in Hong Kong (http://www.marketwatch.com/story/stock-market-shuts-as-hong-kong-braces-for-typhoon-2016-10-20), however, as Typhoon Haima approached.

Stocks in Europe wobbled (http://www.marketwatch.com/story/european-stocks-edge-up-with-weekly-win-in-sight-2016-10-21) as investors digested the European Central Bank's message from Thursday's meeting (http://www.marketwatch.com/story/will-mario-draghi-leave-investors-high-and-dry-in-december-2016-10-20).

The ICE dollar index was up 0.4% at 98.716 on Friday, set for a 0.6% weekly gain. The dollar has been climbing steadily this month on rising expectation the Fed will lift interest rates at its December meeting.

Gold futures were trading mostly flat (http://www.marketwatch.com/story/gold-futures-drop-but-cling-to-weekly-gain-as-dollar-recovers-2016-10-21), pressured by the stronger dollar.

(END) Dow Jones Newswires

October 21, 2016 12:19 ET (16:19 GMT)

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