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Market Hustle: Dow Drops Triple Digits, Treasuries Surge on Somber Global Outlook

NEW YORK (TheStreet) -- U.S. markets sold off sharply Friday as evidence of a global economic slowdown prompted investors to plough money into safe-haven assets and flee the emerging markets.

  • The Dow Jones Industrial Average suffered a crushing, triple-digit drop for the second day, surrendering 3.52% for the week. That's its biggest weekly loss since May 2012. For the session, the index fell 1.96%, or 318.24 points, to 15,879.11.
  • The S&P 500 declined 2.09% to 1,790.29, sending the index down 2.63% for the week.
  • The Nasdaq closed 2.15% lower at 4,128.17, down 1.65% for the week.
  • Emerging market currencies were lower while global equity markets were in the red.
  • U.S. markets also sold off on Thursday amid signs that Chinese manufacturing activity shrank in January and amid a broad-based decline in a U.S. manufacturing index. In addition, McDonald's MCD gave a mediocre global forecast.
  • The benchmark 10-year Treasury gained 14/32, diluting the yield to 2.729%, after weakening to a two-month low of 2.704%. "We expect this flight to the safety of Treasuries to be short-lived," says Jonathan Mackay, Sr. Fixed Income Strategist at Morgan Stanley Wealth Management. "Too many people were on the same side of the trade, expecting rates to go up and then a few news items caught people off guard. We expect rates to eventually move back up."
  • Top Dow laggards on Friday included Caterpillar (CAT), General Electric (GE), and Boeing (BA) which all shed more than 2.6%.
  • Consumer-products giant Procter & Gamble (PG) said it expects strong earnings momentum in the second half of the fiscal year driven by solid top-line growth, moderating foreign exchange headwinds, and productivity savings. Fiscal second-quarter per-share earnings beat estimates by a penny, but fell 1%. Honeywell (HON) earnings came in three cents above fourth-quarter expectations. Microsoft (MSFT) reported fiscal second-quarter earnings and revenue that topped estimates as strong Surface sales growth helped offset continued weakness in Windows OEM. Starbucks (SBUX) said fourth-quarter profit increased by 25%. Still, sales growth slowed, and revenue fell short.
  • S&P Capital IQ said that of the 100 companies that have given guidance this earnings season, 80 have been negative, 10 have been positive and 10 were in-line. This produces a negative-to-positive ratio of 8, higher than the 15-year average.
  • The FTSE 100 finished down 1.62%, and Germany's DAX was off 2.48%. The Nikkei 225 closed down 1.94%, while the Hang Seng slid 1.25%.

-- Written by Jane Searle and Andrea Tse in New York.

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