WRAPUP 2-U.S. manufacturers bracing for economic slowdown

* United Tech says 2009 will be tough

* Textron, Danaher Q4 targets below Street view

* Parker Hannifin slashes fiscal year target 5 pct

* Danaher to lay off 1,000 workers

* Manufacturing sector shares tumble (Adds details, quotes, updates share activity)

By Scott Malone

BOSTON, Oct 16 (Reuters) - The slowing global economy and turmoil in the credit markets have clouded the outlook for top diversified U.S. manufacturers, with demand for big-ticket items falling in September and October as a crisis mentality took hold in financial markets.

United Technologies Corp (UTX.N), Textron Inc (TXT.N), Illinois Tool Works Inc (ITW.N) and Danaher Corp (DHR.N) told investors they were taking aggressive steps to cut costs as they brace for slowing demand, even as sales of their elevators, jets and water treatment systems -- some of which are ordered years in advance -- remained strong.

"We know 2009 is going to be the toughest year we've seen for some time," said Greg Hayes, chief financial officer at United Tech, "Our commitment to double-digit earnings growth remains intact, although I will tell you the environment is making this increasingly difficult for 2009."

Industrial shares fell, with the Standard & Poor's capital goods industry index .GSPIC down about 4 percent in morning trading. Investors focused on worries about the outlook, rather than solid results from a third quarter that was almost over when the worst of the credit crunch hit.

"The third quarter doesn't really mean anything, it's basically describing a situation that doesn't exist anymore," said Peter Klein, senior portfolio manager at Fifth Third Asset Management, which holds United Tech shares. "People are trying to size up how much damage there will be out there."

ROUGH LAST COUPLE OF WEEKS

Orders of corporate jets began to slow late in the quarter, a trend that has continued, Textron Chief Executive Lewis Campbell told investors.

"The order downturn has arrived more quickly than we expected," Campbell said. "The events of the last couple weeks have put a big chill on the market."

Global markets have plunged to five-year lows in recent weeks as the credit crunch claimed Wall Street names including Lehman Brothers Holdings Inc (LEHMQ.PK) and prompted the U.S. government to authorize a $700 billion bailout of the financial industry that will include buying corporate debt for the first time in the nation's history.

"We're seeing some of our larger corporate customers delay, push out, in some cases cancel, some higher-ticket discretionary purchases," said Lawrence Culp, CEO of Danaher, an industrial conglomerate that makes the Craftsman brand of tools, as well as water treatment systems and medical devices.

LAYOFFS BEGIN

Danaher plans to lay off more than 1,000 workers and close a dozen facilities as it braces for the downturn, Culp said. Other companies did not specifically address job cuts, but Textron said it plans to sharply cut back its financial arm as it is hammered by the credit crunch.

While most of the manufacturers reporting declined to provide specific 2009 financial targets citing the market uncertainty, Parker Hannifin Corp (PH.N), which makes fluid and motion control systems and is just starting its fiscal year, warned conditions were deteriorating. [nN15303447]

"There is enough uncertainty in many of our end markets and sentiment among our customers to warrant a downward revision in our earnings expectations," said Parker Hannifin Chairman and CEO Don Washkewicz. Even as it reported a fiscal first-quarter profit that topped analysts' expectations, the company cut the midpoint of its full-year forecast by 5 percent, allowing for the possibility of an earnings decline this fiscal year.

United Tech, which reported a 6 percent profit rise that topped Wall Street's expectations, raised the low end of its 2008 profit forecast by 10 cents to a range of $4.90 to $4.95 per share. [nN16457611]

Danaher's third-quarter earnings also topped consensus, though the company set a fourth-quarter target below analysts' average expectations, according to Reuters Estimates. [nN15404724]

ITW reported a 4.5 percent profit drop that was line with what it told investors to expect last week, when it warned that the quarter had been tougher than it had expected. [nN1637764]

Textron, the world's largest maker of corporate jets, reported a 19 percent profit drop that was worse than analysts had expected, as the credit crunch hammered its finance arm, offsetting strong manufacturing results. [nN16314847]

United Tech shares fell 2.4 percent to $48.06, Textron was down 7.3 percent to $17.67, ITW was down 2.2 percent to $32.95, and Danaher was down 16 cents at $53.85.

The sector as a whole is down 46 percent so far this year, a deeper drop than the 40 percent slide of the broad Standard & Poor's 500 index .SPX. (Additional reporting by Nick Zieminski in New York, editing by Dave Zimmerman)