Recession takes hold in US

WSWS reports: The US stock market plunged Friday on news that General Electric's first-quarter 2008 profits fell far below the company's projections. Long considered among the most gilt-edged of stocks, GE shares fell 13 percent, their sharpest one-day drop since the stock market collapse of October 1987.

The announcement that GE's first-quarter earnings were down 5.8 percent stunned Wall Street, which was confident the company would meet its earlier projections since it had reaffirmed those predictions only weeks before, on March 13. GE Chairman Jeffrey R. Immelt attributed the profit decline, mainly the result of large write-downs of assets in its financial business, to the intensification of the credit crunch in the wake of the collapse of Bear Stearns on March 14.

"The last two weeks in March were a different world in financial services," GE Chairman Jeffrey R. Immelt said in a conference call to investors.

However, the company also saw profits fall in its healthcare and industrial branches. GE cut its forecast for all of 2008. The one-day stock decline wiped out $44 billion in share values.

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According to an article in the Los Angeles Times, estimated first quarter profit growth for the tech sector of the S&P Index has fallen from 14 percent on January 1 to 7 percent now. The industrial sector is expected to post growth of just 1 percent, down from an estimated 8 percent on January 1.

For the S&P 500 as a whole, first quarter earnings are expected to be down 14 percent from a year earlier, largely because of continuing losses at financial companies.

But the results posted by GE and Alcoa suggest that profits could take an even bigger hit.

Another stark indicator of the downward trajectory in both the US and other countries was provided Friday by the International Energy Agency, which made its biggest reduction in world oil demand growth estimates in seven years. It cut its projection of world oil demand growth by 35 percent from its January estimate.

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