* U.S. stocks down with bond prices, dollar
* Sterling hits highest in year vs euro after UK data
* European shares, periphery bonds extend gains
* Dollar index steady on Fed taper prospects
* Australia inflation data hurts shares, lifts Aussie
By Barani Krishnan
NEW YORK, Jan 22 U.S. stocks fell on Wednesday
as disappointing company earnings gave investors few reasons to
extend last year's rally, while bond prices slipped with the
dollar as markets took in their stride another possible cut in
the Federal Reserve stimulus.
European assets grabbed the spotlight, with sterling hitting
a three-week high against the dollar and a one-year high against
the euro on hints of an impending UK rate hike. European stocks
extended gains on encouraging corporate results and a rally in
southern euro zone government bonds.
An upgrade of the International Monetary Fund's world
forecasts lifted sentiment in global equities, keeping world
On Wall Street, the S&P 500 and Dow were down, while the
tech-heavy Nasdaq rose.
"There has been little so far to excite the masses and it is
going to lead many to question, can this market hang in there
with flat earnings environment?" said Andre Bakhos, managing
director at Janlyn Capital LLC in Bernardsville, New Jersey.
IBM shares lost 3.3 percent to $182.24, becoming the
biggest drag on both the Dow and S&P 500 indexes. The world's
largest technology services company missed revenue expectations
for a fourth straight quarter amid weakening demand,
particularly in growth markets like China.
Coach Inc tumbled 6 percent to $49.38, the worst
performer on the S&P 500. It said sales in North America fell
further in the final quarter of 2013, as it lost share in the
handbag business to fast-growing rivals.
United Technologies Corp was up 0.9 percent at
$116.01, offsetting some of the bearish sentiment. The world's
largest maker of elevators and air conditioners reported higher
fourth-quarter profit that topped Wall Street estimates, despite
revenue that fell shy of expectations.
Norfolk Southern Corp jumped 6.4 percent to $94.39
as one of the best performers on the S&P 500. The railroad
posted a 24 percent rise in quarterly income that beat Wall
Street expectations. The gains helped lift the Dow Jones
Transportation average to a record high.
Those weren't enough to lift the broader market, though.
By 11:52 a.m. EST (1652 GMT), the Dow Jones industrial
average was down 59.85 points, or 0.36 percent, at
16,354.59. The Standard & Poor's 500 Index was down 1.37
points, or 0.07 percent, at 1,842.43. The Nasdaq Composite Index
was up 9.97 points, or 0.24 percent, at 4,235.73.
"It will be easier to unnerve a market with less earnings
confidence, and you are seeing companies like IBM and Coach that
have come out and leave the investor looking for something
substantial to bite into," said Janlyn Capital's Bakhos.
The dollar slipped against sterling and the Aussie dollar
while it was little changed against a basket of currencies
. Investors expect the Fed to make another $10 billion cut
to its monthly bond-buying program of $75 billion. The central
bank's policy-setting committee will meet on Jan. 28-29.
The pound rallied after another sharper-than-expected fall
in UK unemployment, to 7.1 percent, provided fresh proof of a
strengthening economy and bolstered speculation that a Bank of
England rate increase may not be too far off.
Minutes from the BoE's last meeting, released at the same
time as the data, showed policymakers now acknowledged
unemployment was likely to fall to the 7 percent threshold they
have set for reviewing the bank's policy, "materially earlier"
The news sent sterling surging to its highest in a year
against the euro, up against the dollar while
UK government bonds, or gilts, lost out as investors sought out
"It will certainly be the big challenge for Bank of England
governor Mark Carney and the MPC (Monetary Policy Committee) in
managing the forward guidance," said Michael Hewson, chief
strategist at CMC Markets.
"What does he do when it does hit 7 percent? ... I think the
only way is up for the pound."
U.S. Treasuries prices fell and benchmark yields edged up
from five-week lows, with prices dragged lower by weaker German
The benchmark 10-year U.S. Treasury note was down 7/32 to
yield 2.849 percent. The 10-year yield hit 2.818
percent on Friday, its lowest level since Dec. 11, according to
World stocks were flat while European stocks
rose for a second straight day.
Among commodities, oil climbed on expectations that
accelerating growth in industrialised economies would lift
demand. U.S. crude oil futures rose almost 2 percent to
$96.77 a barrel, its highest since Jan. 2.