Caterpillar Squashed

The company said it expects sales outside North America to be up 24% for the year -- representing a year-over-year rise of about $4.5 billion. That should more than offset a $2.4 billion, or 12%, sales decline in North America.

"This reflects solid 2007 economic and industry growth in most of the world outside North America," said the company.

The disappointing report sparked a broader selloff in the stock market that recently had the Dow down 116 points to 13,884. The trading came one day after the blue-chip index had crossed the 14,000-mark for the first time in history.

While Caterpillar's results play into lingering uncertainties about the state of the U.S. economy amid rising interest rates and a broad housing slowdown, they also spoke to the strength of the broader global economy.

Sales in Europe, the Middle East and Africa rose 35%, boosted by increased deliveries to end users, economic growth in Europe, construction activity in Africa and increased activity in drill rigs and mine development.

Caterpillar said sales in the Asia/Pacific region rose 23%, boosted by growth in mining spurred by higher prices for metals and coal and higher construction spending in China.

"Economic growth outside North America appears slightly more favorable than we expected in the last report," said Caterpillar. "That improvement occurs even though interest rates are higher than what we assumed in the previous outlook."