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US markets plunge on earnings and euro zone worries

20 Oct 2012 Evaluate

The US markets fell sharply on Friday, with the major indices suffering their worst single-day drop since June led by disappointing earnings, particularly in the tech sector and as euro-area leaders failed to discuss aid for Spain at a summit. Strikingly, the drop in market took place on the 25th anniversary of the worst one-day crash in US history as profits trailed analyst estimates at half of the 18 companies in the S&P 500 that released results undermining confidence in an earnings season that had seen about three-quarters of companies beat forecasts. Microsoft reported a drop in fiscal first-quarter profit and revenue. Also, AMD reported a big loss and issued a disappointing revenue forecast for the current period. Besides, sales of existing homes fell in September, with declines in all regions but the South, while longer-term trends showed growth. According to data released by the National Association of Realtors, existing-home sales fell 1.7% to a seasonally adjusted annual rate of 4.75 million from a slightly upwardly revised rate of 4.83 million in August. A prior August estimate pegged the rate at 4.82 million.

In Europe, the heads of the 17-nation euro zone agreed to continue their pursuit of a banking supervisor while EU summit failed to discuss further financial assistance for Spain. Germany and France agreed to enforce common banking regulation for the euro area’s 6,000 lenders by the end of next year. Also, the euro area leaders stated that for now they are satisfied with the progress in the negotiations between Greece and troika. However, the leaders urged Greece to continue budgetary and structural policy reforms to achieve renewed growth. Separately, German producer prices rose and the UK public sector net borrowing declined.

The Dow Jones Industrial Average lost 205.43 points, or 1.52 percent, to close at 13,343.50, the S&P 500 finished down by 24.15 points, or 1.66 percent at 1,433.19, while the Nasdaq ended lower by 67.24 points, or 2.19 percent to settle at 3,005.62.

Indian ADRs closed in red on Friday, Infosys was down by 0.75%, Tata Motors was down by 0.75%, ICICI Bank was down 0.66%, Sterlite Industries was down by 0.27% and Dr. Reddy’s Lab was down by 0.24%.

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