GE: Live by the Sword, Die by the Sword

Thursday's optimism about M&A, biotechs and chips was torpedoed early Friday by a shocking miss by General Electric.

GE posted first-quarter earnings from continuing operations of 44 cents per share, down 8% from a year ago and a whopping 7 cents below expectations.

Remember, this is the company that famously beat expectations by a penny (or 2) quarter after quarter during the Jack Welch era, so a 7 cent shortfall is jarring -- as reflected in GE's plummeting shares.

Critics said GE's ability in prior years to "manage earnings" was driven by its GE Capital unit (since split into separate divisions), which - because of its opaque nature -- allowed the company to "smooth out" the cyclicality of its industrial businesses.

GE, of course, denied such machinations. But the reality is company is now seeing that its growing dependence (nefarious or otherwise) on financial services in recent years is a double-edged sword.

GE said its finance units were responsible for 5 cents of the 7 cent miss because of mark-to-market losses, impairments and its difficulty (or inability) to sell assets.

"The financial services environment was very difficult and became even more difficult late in the quarter," CEO Jeffrey Immelt said on GE's conference call. "We had planned for an environment that was going to be challenging, but what I would say is kind of late in the quarter, particularly after the Bear Stearns event, we experienced an extraordinary disruption" in the financial arena.

Live by the sword, die by the sword.

GE's miss was the primary driver of market's weakness Friday but traders were also reacting negatively to last night's results from Genentech. The biotech bellwether's earnings were above expectations and its revenue in-line, but sales for its biggest drugs were disappointing and the company's full-year guidance of $3.35 to $3.45, while unchanged, compares poorly to analysts' consensus of $3.43.