Global stock indexes fell yesterday following disappointing earnings results and weaker-than-expected US durable goods orders, while the euro rose for a second day against the dollar.
All three major US stock indexes were down around two per cent in early trading.
Shares of Microsoft and Caterpillar weighed on US stocks. Microsoft’s results showed the main engine of its historic earnings power, selling Windows and Office software to big businesses, is waning. Caterpillar’s quarterly profit came in below analysts’ expectations and it warned that lower oil prices will hurt 2015 results.
Data showing an unexpected decline in US durable goods orders added to the weaker tone for stocks. Offsetting some of the bearish news was a US consumer confidence reading that was the highest since 2007.
Investors also were cautious ahead of the first policy meeting of the US Federal Reserve this year. They will be keen to hear the Fed’s response to policy easing by global central banks such as the European Central Bank, whose long-awaited plan to buy bonds to revive the flagging euro zone has propelled bond yields and the euro to multi-year lows and stocks to multi-year highs.
The Dow Jones industrial average fell 362.28 points, or 2.05 per cent, at 17,316.42. The Standard & Poor’s 500 Index was down 33.18 points, or 1.61 per cent, at 2,023.91. The Nasdaq Composite Index was down 99.71 points, or 2.09 per cent, at 4,672.06.
MSCI’s global share index was down 0.6 per cent, while an index of European shares fell 1.1 per cent.
Russia was also in the spotlight after a cut to its credit rating dealt a further blow to the rouble, though yesterday the currency had regained some ground against the dollar.
The cost of insuring exposure to Russia’s debt rose after Standard & Poor’s cut Russia’s sovereign credit rating to “junk” late on Monday, citing weakened economic growth prospects and Western sanctions over Ukraine.
The euro rose for a second day against the dollar.
The single currency climbed to $1.1369, up 1.2 per cent on the day, moving further away from an 11-year low of $1.1098 hit early on Monday after it became clear that Greece had voted in a new anti-bailout government.
Investors widely expect the Federal Reserve to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening.
Yet its timetable remains for higher rates by mid-year, a trajectory that presages further broad-based gains for the dollar.
US Treasuries prices were higher, with yields on benchmark 10-year note dipping to 1.75 per cent.
In commodity markets, oil prices were up slightly, along with gold. Brent futures were trading at $48.37 a barrel, up 21 cents, and US crude was up 32 cents at $45.47 a barrel. Spot gold was up 0.5 per cent at $1,287.30 an ounce.