Stocks, oil sag as U.S. consumer sentiment sours

By Herbert Lash

NEW YORK (Reuters) - Flagging U.S. consumer sentiment and a Chevron profit warning fed jitters about an economic recovery on Friday, knocking down global stocks and oil prices while boosting the safe-haven appeal of the dollar and government debt.

U.S. crude prices slid below $59 a barrel in their biggest weekly decline since late January, while both the Dow and S&P 500, along with European shares, notched a fourth straight week of losses.

Crude's 10 percent slide this week has underscored worries that the recovery will be weaker than originally hoped and that second-quarter corporate results, which are just starting to be released, are unlikely to surprise much on the upside.

U.S. consumers' moods soured in early July on persistent worries about jobs, the Reuters/University of Michigan Surveys of Consumers showed, offering little hope that consumer spending will help a sputtering economy.

"The Michigan number was a bit of a disappointment," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London.

Some economic data points have failed to meet expectations the economy will pick up this year, said Cleveland Rueckert, market analyst at Birinyi Associates in Stamford, Connecticut.

"People are starting to question whether the economic recovery is going to take place in the latter part of this year or whether it's going to come next year," Rueckert said.

The disappointing outlook late Thursday from Chevron Corp (CVX.N), the second-largest U.S. oil company, set the tone for equity markets worldwide.

MSCI's all-country world index .MIWD00000PUS fell 0.6 percent. Chevron fell 2.7 percent, the top Dow decliner.

Few companies will raise their outlooks during this reporting season, said David Katz, chief investment officer at Matrix Asset Advisors in New York.

"There's no incentive to step up and talk up the future, especially because there's low visibility," Katz said. "Our expectation is that companies are going to do what they've been doing: beating expectations but setting a low bar and being cautious."

The Dow Jones industrial average .DJI closed down 36.65 points, or 0.45 percent, at 8,146.52 and The Standard & Poor's 500 Index .SPX slid 3.55 points, or 0.40 percent, at 879.13.

But the Nasdaq Composite Index .IXIC rose 3.48 points, or 0.20 percent, at 1,756.03 as the tech-rich Nasdaq outperformed the wider market.

Goldman Sachs upgraded the U.S. hardware and software sectors to "attractive" from "neutral," citing potential growth in demand from businesses.

In Europe, the FTSEurofirst 300 .FTEU3 index of top regional shares fell 1.1 percent to close at 814.29 points, its lowest close in more than 10 weeks.