While you were sleeping: US earnings miss the mark

Wall Street declined as disappointing American corporate earnings, including from Bank of America, fuelled unease that the recent gains in equities might not be justified by the economic outlook.

Shares of Bank of America fell, last down 5.3 percent, as the bank reported a lower-than-expected increase in its first-quarter net income.

"Banks are clearly struggling," Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, told Reuters. "Loan growth has been disappointing, which points to economic growth not being robust."

Yet banks are not alone. Shares of Apple also took a hit, last 6 percent weaker, amid concern about disappointing iPhone sales after one of its suppliers, Cirrus Logic, said it expected to post a significant inventory reserve charge. Cirrus Logic shares tumbled 15.3 percent.

In afternoon trading in New York, the Standard & Poor's 500 Index fell 1.46 percent to 1551.78, compared with the record-high 1593.37 it closed at on April 11.

"The market's advance has been out of sync with weak earnings and economic trends," Jonathan Golub, chief US equity strategist at UBS, wrote in a note dated yesterday, according to Bloomberg. "Another spring break is likely to materialise and that now is a good time to begin dialling back on risk."

The Dow Jones Industrial Average shed 0.90 percent, while the Nasdaq Composite Index fell 1.79 percent.

The US economy grew at "a moderate pace" from late February to early April, according to the Federal Reserve's latest Beige Book.

"Most Districts noted increases in manufacturing activity since the previous report," the Fed said. "Particular strength was seen in industries tied to residential construction and automobiles, while several districts reported uncertainty or weakness in defense-related sectors.

"Outlooks among respondents remained optimistic across sectors and districts, with growth mostly expected to continue at the same or a slightly improved pace," according to the Fed.

In Europe, the Stoxx 600 Index dropped 1.5 percent, while France's CAC 40 sank 2.4 percent.

Germany's DAX Index slumped 2.3 percent amid increased concern that the economic engine of Europe is beginning to falter under the weight of the euro region's ongoing debt crisis.

In an interview with the Wall Street Journal, Bundesbank president Jens Weidmann signalled the European Central Bank could reduce interest rates if economic and inflation data suggest it is warranted.

The UK's FTSE 100 Index fell 1 percent as data from the Office for National Statistics showed unemployment climbed by 70,000 to 2.56 million in the three months through February, the most since November 2011.

(BusinessDesk)