Dismal consumer sentiment data and anemic revenues from GE and two big banks slammed US stocks on Friday, driving down major indexes more than 2 per cent.
Apple shares fell after Chief Executive Officer Steve Jobs offered buyers of the firm's new iPhone a fix for its dodgy antenna.
The slide in the S&P 500 was a decisive break of an 8 per cent rise over the last two weeks as investors lost hope that strong earnings could overcome doubts about the economic outlook.
The Dow Jones industrial average dropped 261.41 points, or 2.52 per cent, to 10,097.90. The Standard & Poor's 500 Index slid 31.60 points, or 2.88 per cent, to 1,064.88. The Nasdaq Composite Index lost 70.03 points, or 3.11 per cent, to 2,179.05.
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SPI futures down 79 points to 4327
Australian dollar sinks to 86.9 US cents
European stocks retreat for a third day
Gold futures drop $US20 to $US1188
Oil futures steady at $US76 a barrel
Reuters/CRB Commodity index down 1% to 262
Wall Street week ahead
Your calendar of business events July 19-24
Australian markets, meanwhile, are poised to fall when trading resumes on Monday. The SPI 200 futures index was down 79 points, or 1.8 per cent, to 4327. Yesterday the benchmark S&P/ASX200 Index ended the day down 19.9 points, or 0.4 per cent, at 4427.7 points, while the broader All Ordinaries Index was also down 19.7 points, or 0.4 per cent, to 4437 points. For the week, the ASX gained 0.6 per cent.
The Australian dollar lost more ground overnight against the US dollar. It was buying 86.9 US cents, down about 1 US cent from the local close. It was also worth 67.2 euro cents, 56.8 pence and 75.2 yen.
"Economic recoveries rarely go smoothly," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.
"They're very sensitive to anything that helps or hurts confidence, on the corporate side and the consumer side."
General Electric Co, Bank of America Corp and Citigroup Inc joined the list of major companies that beat Wall Street's expectations, but investors unloaded some shares of all three after the companies reported a drop in quarterly revenues.
"The next step for earnings has to be top line or revenues, and revenues slowed down along with the consumer and the economy in the second quarter," Dudack said.
Bank of America, the biggest US bank, slid more than 9 per cent and the S&P financial index dropped 4.4 per cent as investors fretted about how banks will make money going forward.
Trading volume picked up late in the day after waning since the beginning of July.
For the week, the Dow fell 1 per cent, while the S&P 500 dropped 1.2 per cent and the Nasdaq gave up 0.8 per cent.
During Friday's session, GE's stock fell 4.6 per cent to $US14.55, while Citigroup lost 6.3 per cent to $US3.90. Bank of America was down 9.2 per cent at $US13.98.
Earnings optimism
The S&P 500 climbed 7.2 per cent from July 2 through yesterday amid optimism that corporate earnings would signal the economic recovery is sustainable. S&P 500 companies are projected to increase profits by 34 per cent in 2010 and 18 per cent in 2011, the fastest two-year gain since 1995, according to analyst estimates compiled by Bloomberg. Of the 23 companies in the S&P 500 that reported since July 12, all but three have topped forecasts for earnings-per-share, Bloomberg data show.
Revenue for the group that has reported so far has increased 2.6 per cent, with 17 of 23 companies beating analyst estimates, according to the data.
Weak energy costs pushed consumer prices down for a third straight month in June, US government data showed. That report and the Thomson Reuters/University of Michigan data were the latest in a string of economic indicators showing the pace of the recovery is slowing.
Google Inc shares also sagged after the company missed profit expectations for the first time in two years. The stock was down 7 per cent at $US459.61.
Among the Nasdaq's other leading decliners, Gilead Sciences Inc tumbled 8.5 per cent to $US31.94 after Jefferies cut its price target on the stock to $US38.00 from $US48.00.
The Thomson Reuters/University of Michigan survey of consumers showed US consumer sentiment fell far more than expected to 66.5 in a preliminary July reading, down sharply from 76.0, June's final number. Earlier, the US Labor Department reported the US Consumer Price Index dipped 0.1 per cent in June, which was weaker than the forecast for no change.
The S&P's consumer discretionary sector was among the biggest losers; the sector's index fell 3.5 per cent.
About 9.35 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, just below last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 4 to 1, while on the Nasdaq, more than seven stocks fell for every one that rose.
Reuters, with Bloomberg News
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