Blue Chips Take a Plunge in the Week

Friday's Gain Ends a Rough Patch, With Multinationals Losing Favor; SeaWorld IPO Is Bright Spot

By JONATHAN CHENG and MATT JARZEMSKY

Stocks rose, trimming the biggest weekly loss of the year for the Dow industrials, but investors continued to grapple with uneven earning news from some of the market's biggest names.

Disappointing earnings reports from General Electric, GE -4.06% International Business Machines IBM -8.28% and McDonald's MCD -1.95% are casting doubt on a widely held belief among investors that U.S.-based multinationals are best positioned for a sluggish global economy.

The Dow Jones Industrial Average added 10.37 points, or 0.1%, to 14547.51, closing near its high after spending much of the day in negative territory. For the week, it fell 317.55 points, or 2.1%.

IBM, which has the highest weighting among the Dow's 30 components, plunged 8.3%, its biggest daily percentage slide in eight years, after reporting bigger-than-expected declines in quarterly earnings and revenue. GE lost 4.1%, meanwhile, and McDonald's shed 2%. The Standard & Poor's 500-stock index rose 13.64 points Friday, or 0.9%, to 1555.25.

A bright spot in the market continued to be initial public offerings. SeaWorld Entertainment SEAS +24.15% jumped 24% to $33.52 a share Friday in its first day of trading on the New York Stock Exchange. The theme-park operator's exposure to a rebound in consumer spending and plans to pay a dividend of about 3% drew buyers, according to traders and bankers familiar with the deal.

SeaWorld's $702 million debut was priced late Thursday at the top of the range expected by the company and its bankers. The company's private-equity backer, Blackstone Group, BX +0.30%raised the amount of stock it would sell in the offering by 60% shortly before the deal priced, another sign of strong demand.

Friday's positive day marked a relatively quiet close to a week that had disrupted the sense of calm that characterized the year so far.

The rough patch started with Monday's opening bell, as a downbeat weekend reading on Chinese economic growth and the largest slide in gold prices in 30 years sent the Dow to its biggest one-day drop of the year. The initial reports of the Boston Marathon bombing Monday afternoon added to investors' jitters.

Over the course of the week, stock prices continued to swing widely, with the Dow posting three consecutive triple-digit moves, as earnings news gave many investors pause.

Since the financial crisis in late 2008, large multinational companies have recovered more quickly than many others, powering the Dow and the S&P 500 to record levels.

Investors have attributed the strength of the companies to their strong balance sheets and their ability to tap growth around the world, at a time when U.S. economic growth remains anemic.

But those advantages may be reaching a limit, investors now say. "We've definitely hit an air pocket," said David Waddell, president and chief investment strategist at Waddell & Associates, which manages about $720 million in Memphis, Tenn.

"Earnings have been able to outperform the underlying fundamentals in the past few quarters, and that's coming to an end. If we want to see earnings do better, we're going to need the global economy to improve," Mr. Waddell said.

With economic prospects around the world still weak, investors have been gravitating toward companies more focused on the U.S., said Jonathan Golub, chief U.S. equity strategist at UBS UBSN.VX +3.23% .

In particular, big industrial companies like GE and Caterpillar CAT -0.04% and technology companies like Apple AAPL -0.39% and have fallen out of favor among investors. "Industrial and tech companies are a play on a robust global economy, and that's why they're struggling more," Mr. Golub said.

Even so, some investors say that, despite their recent earnings troubles, there are few substitutes for the strength of strong global companies.

"Growth has not been impressive for many years, and in some ways it's surprising that it's taken this long for multinational companies' earnings to disappoint," said Colleen Supran, principal and portfolio manager at Bingham, Osborn & Scarborough in San Francisco, which manages about $2 billion in investments.

Write to Jonathan Cheng at jonathan.cheng@wsj.com and Matt Jarzemsky atmatthew.jarzemsky@dowjones.com

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