By Fred Imbert, Ryan Browne and Eustance Huang , CNBC
Stocks fell Friday as the release of disappointing quarterly results from key tech companies overshadowed strong economy data.
The Dow was down 400 points, with Cisco Systems lagging. The S&P 500 fell 2.3 percent, entering correction territory, while the Nasdaq dropped 3 percent.
Amazon and Google parent Alphabet fell more than 6 percent and 2 percent, respectively, after they released their latest quarterly results. Earnings for both companies topped analyst estimates, but revenues fell short.
There were "high expectations" for this earnings season, King Lip, chief strategist at Baker Avenue Asset Management, told CNBC. "The earnings are not coming in as great as people had suspected," Lip said, adding that "for Amazon specifically, forward guidance was surprisingly light."
These declines were enough to offset a better-than-expected report on U.S. economy growth. The Commerce Department reported the U.S. economy grew at a 3.5 percent rate in the third quarter, above a 3.4 percent estimate. The government also said its personal consumption expenditures (PCE) index, a key measure of inflation, increased by 1.6 percent last quarter.
Stock have suffered in recent weeks as fears of rising inflation — and rising interest rates — trim corporate profit expectations. Since the PCE index is the Federal Reserve's preferred inflation gauge, any sign that the measure may be slowing could stall the central bank in its plan to continue to raise the overnight rate.
Consumer spending, which account for more than two-thirds of economic activity, surged by 4 percent in the third quarter, the fastest pace since the fourth quarter of 2014.
Friday's decline comes after equities rallied in the previous session. The major average are also set to post big losses for the week. The S&P 500 and Dow are down 2.2 percent and 1.8 percent this week, respectively, entering Friday's session.
These losses also add to a sharp drop seen throughout this month. Through Thursday's close, the Dow and S&P 500 were down 5.6 percent and 7.2 percent for October, respectively. The Nasdaq, meanwhile, had lost 9.1 percent.
Several factors have conspired to knock markets down this month — some earnings disappointment, fear of rising interest rates, a brewing conflict between Italy and the European Union over budget spending, criticism of oil power Saudi Arabia after the killing of a dissident journalist and finally, worries that world growth is losing steam.
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