Wall Street drops as banks disappoint

A crop of largely disappointing earnings reports in the financial sector sent broader Wall Street stocks tumbling, though blue chips were cushioned by strong earnings from IBM.

At the close (10am NZ time), the Dow Jones Industrial Average was down 12.64 points, or 0.1%, to 11,8225.29, led by strong gains of 2.8% at IBM, which reported a near doubling of second-quarter net income. Revenue at the tech giant rose 50% to $US383.6 million.

Pulling on the downside, American Express lost 2.7% after the card company projected fourth-quarter earnings that slightly missed estimates and said it would cut about 550 jobs as it consolidated some facilities. Bank of America was also weak, sliding 4.1%.

Goldman Sachs fell 4.4% after fourth-quarter earnings narrowly beat estimates but revenue fell more than expected. Wells Fargo dropped 1.8% after its fourth-quarter earnings just met expectations, though it posted stronger-than-expected revenue.

Shares in the broader market fell the most in nearly two months. The S&P 500 index was down 1.0% to 1281.92, its steepest drop since November 23, while the Nasdaq Composite plunged 1.5% to 2725.36.

Other markets: Europe up, Asia down
European stocks declined, led by the auto and mining sectors, though pessimism also engulfed technology shares on a foggy outlook from Dutch lithography company ASML.

The Stoxx Europe 600 index spent the day in the red but the losses accelerated in the afternoon. It finished down 1.4% at 282.72. On Tuesday, it closed at its highest level in more than two years.

London's FTSE 100 was down 0.2% at 6046.51, Frankfurt's DAX was flat at 7144.90 and in Paris the CAC-40 was 0.1% lower at 4010.47.

Upbeat results from Apple and IBM inspired gains in Asia's technology stocks, while a weaker US dollar helped lift commodity-sector shares.

In China, the Shanghai Composite climbed 1.8% to 2758.10, while Hong Kong's Hang Seng Index rose 1.1% to 24,419.62.

Japan's Nikkei Stock Average edged up 0.4% to close at 10,557.10.

Korea's Kospi added 0.9% to 2115.69, yet another record, while Taiwan's Taiex climbed 1.1% to 9086.02, and Thailand's SET rose 1% to 1034.80.

Australia’s S&P/ASX was up 0.7% to 4834.56 and India’s Sensex was down 0.6% to 18,978.32.

Commodities: Oil down, gold up
Crude futures retreated after early gains as traders turned their gaze to key inventory data due later this week.

Light, sweet crude for February delivery settled 52USc, or 0.6%, lower at $US90.86 a barrel in New York, after rising as high as $US92.10 earlier in the session.

By contrast, Brent crude on the ICE futures exchange settled 36USc higher at $US98.16 a barrel.

Gold futures gained as investors wanted an alternative to the US dollar, which was under pressure as a visit to the US by Chinese President Hu Jintao underscored the swelling US fiscal imbalance and China's controversial currency peg.

In the Asian trading session, the People's Bank of China fixed the yuan at a record high against the US dollar.

The most actively traded gold contract, for February delivery, gained $2 to settle at $US1370.20 an ounce in New York.

Currencies: Dollar down, euro up
The U.S. dollar lost ground, helping the euro touch its highest level in two months, as investors became more comfortable with Europe’s debt situation and looked forward to economic data from China.

The euro touched $US1.3538, the highest since late November, and traded at $US1.3490, up from $US1.3388 in late North American trading on Tuesday.

Against the Japanese currency, the dollar fell to ¥81.94, down from ¥82.61. The UK pound pared earlier gains but remained up slightly at $US1.5991, from $US1.5965.