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GLOBAL MARKETS-Weak earnings pressure shares, support U.S. Treasuries

by on October 26, 2012 4:10 pm BST
 

Fri Oct 26, 2012 12:10pm EDT

* Wall St hit by earnings; S&P down 1.7 percent for week

* U.S. Treasuries climb in price with safe-haven support

* U.S. 3rd-quarter economic growth accelerates to 2 percent

By Angela Moon

NEW YORK, Oct 26 (Reuters) – Global shares fell on Friday
while U.S. Treasuries climbed with safe-haven support as
lackluster corporate earnings reports undermined investor
confidence.

Although data showed a pick-up in U.S. economic growth in
the third quarter, gloomy earnings and outlook statements from
major global companies such as Apple and Amazon
, South Korea’s Samsung and Renault and
Ericsson in Europe corroded hopes of a recovery in
the global economy.

Wall Street stocks fell as Apple shares declined more than 1
percent, although Amazon.com rebounded from earlier losses.

U.S. gross domestic product expanded at a 2.0 percent annual
rate, accelerating from the second quarter’s 1.3 percent. But
even the positive data was not be enough to stem a recent slide
in the market, which has caused the S&P 500 index to drop 3.3
percent over the past six sessions, its worst 6-day run in five
months.

“In spite of the pleasant surprise on the top-line GDP
number, the general tone of this report was not particularly
encouraging as the unsustainable bounce in government spending
in Q3 will leave a big hole that is unlikely to be filled in
Q4,” said Millan Mulraine, a senior economist at TD Securities
in New York.

In Europe, stocks erased earlier loses to trade little
changed. The FTSEurofirst 300 was up 0.2 percent at
1,097.94, having traded as low as 1,087.50. The MSCI world
equity index was down 0.5 percent at 327.76.

“I think the overall market weakness is indicative of
further confirmation that the earnings picture continues to get
more challenging, and it’s a global phenomenon,” said Peter
Boockvar, portfolio manager at Miller Tabak + Co in New York.

The Dow Jones industrial average was down 54.13
points, or 0.41 percent, at 13,049.55. The Standard & Poor’s 500
Index was down 8.74 points, or 0.62 percent, at 1,404.23.
The Nasdaq Composite Index was down 22.50 points, or
0.75 percent, at 2,963.61.

The S&P 500 was down 1.7 percent for the week, as dismal
corporate earnings and cautious outlooks, especially from large
multinationals, painted a pessimistic picture of the global
economy.

Adding to uncertainty was the impending U.S. presidential
election on Nov. 6, with the benchmark S&P index below a key
support level, the 50-day moving average, at around 1,434.

Many analysts expect the retreat to wane near 1,400 or
1,375, as the Federal Reserve’s latest stimulus policy puts a
floor under equity prices.

WEAK EARNINGS

Late on Thursday, Apple Inc, the world’s largest company by
market capitalization, reported a second straight quarter of
disappointing results and iPad sales fell well short of
analysts’ targets. The company also forecast revenue and margins
below Wall Street forecasts. The stock was off
2.2 percent at $596.03.

Amazon.com Inc also posted its first quarterly net loss in
more than five years. It forecast fourth-quarter revenue that
fell short of analysts’ expectations. But the
stock rose 2.8 percent to $229.11 on Friday, rebounding from
earlier losses.

With 244 companies in the S&P 500 having reported, 62.3
percent have beaten earnings expectations, a tad better than the
typical 62 percent average, Thomson Reuters data showed.

Revenue for the quarter has been more disappointing, with
just 36.3 percent of companies reporting higher-than-expected
revenue compared with a historic beat rate of 62 percent.

U.S. Treasuries rose in price on Friday with safe-haven
bidding spurred by lackluster corporate earnings and
expectations the higher pace of third-quarter U.S. growth cannot
be carried over into next year.

Uncertainty over the impact of the “fiscal cliff” of tax
increases and government spending cuts set to kick in at the
beginning of next year also underpinned Treasuries purchases.

Benchmark 10-year Treasury notes were trading
14/32 higher in price to yield 1.76 percent, down from 1.81
percent late Thursday and just below the 200-day moving average.

Oil recovered from an earlier decline on Friday to trade
slightly below $109 a barrel. Brent crude was up 31
cents to $108.80 a barrel, having fallen to as low as $107.40.
U.S. oil slipped 26 cents to $85.79.

In the currency market, the greenback pared losses versus
the Japanese yen. The U.S. dollar last traded at 79.64 yen
, still down 0.8 percent on the day.