While you were sleeping: Microsoft, Caterpillar slump

Equities on both sides of the Atlantic slumped as disappointing corporate results including from Microsoft, Caterpillar and Siemens stoked concern about equity valuations and the impact of slow global economic growth.

Microsoft's latest quarterly results failed to meet the mark, particularly in commercial licensing revenue, its historic bellwether business.

"Even though they beat on consumer and devices, it was a slight miss on the commercial side," Daniel Ives, an analyst at FBR Capital Markets & Co, told Bloomberg News. "That gives you a B-plus quarter where some investors were looking for an A-minus."

In afternoon trading in New York, the Dow Jones Industrial Average dropped 1.60 percent, the Standard & Poor's 500 Index declined 1.17 percent, while the Nasdaq Composite Index fell 1.56 percent.

The Dow fell, led by slumps in shares of Microsoft and those of Caterpillar, down 9.2 percent and 8 percent respectively.

"Currency headwinds, as well as evidence of a continual deceleration of global growth, is having a major impact on quarterly results," Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co, told Bloomberg News. "Coupled with that, durable goods orders were somewhat disappointing, which scotches any optimism for today's trading session."

Caterpillar earnings were short of expectations and Caterpillar Chief Executive Officer Doug Oberhelman said that the company was "without a doubt, facing a tough year in 2015."

"We expect world economic growth to only improve modestly in 2015," Oberhelman said in a statement. "The relatively slow growth in the world economy and continued weakness in commodity prices-particularly oil, copper, coal and iron ore-are expected to be negative for our sales."

"The recent dramatic decline in the price of oil is the most significant reason for the year-over-year decline in our sales and revenues outlook," according to Oberhelman. "Current oil prices are a significant headwind... In addition, with lower prices for copper, coal and iron ore, we've reduced our expectations for sales of mining equipment. We've also lowered our expectations for construction equipment sales in China."

In the Dow, shares of Intel and Cisco also slid, down 4.6 percent and 3.9 percent respectively.

"US equities could come under pressure as investors ratchet down their growth estimates for the US economy," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, told Reuters. "There was just too much hype about the US economy having risen into a new and higher growth channel. We're still stumbling along."

US Federal Reserve policy makers began a regularly scheduled two-day meeting and will release a statement on Wednesday, which will be scrutinised for any clues about the timing of an interest rate increase.

In Europe, the Stoxx 600 Index ended the session with a 1 percent slide from the previous close, as here too, the focus was on disappointing corporate results including from Siemens. The UK's FTSE 100 Index fell 0.6 percent, France's CAC 40 Index gave up 1.1 percent, while Germany's DAX Index dropped 1.6 percent.

The Greek benchmark stock index sank 3.7 percent, extending Monday's slide following the electoral victory of the anti-austerity party Syriza on Sunday.

(BusinessDesk)