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Wall St falls after World Bank forecasts

Monday, October 08 16:36:02

U.S. stocks declined today after the World Bank cut growth forecasts for East Asia, highlighting concerns about the global economic climate and corporate profits on the cusp of the quarterly earnings season.

The World Bank reduced its growth forecasts for the East Asia and Pacific region and said there was a risk the slowdown in China could worsen and last longer than many analysts have forecast. China, the world's second largest economy, has been hampered by the euro zone debt crisis. Europe is China's largest trade partner.

"There is just a lot of uncertainty out there, so any little thing right now tends to be a bit of a drag. Some of it is China, some of it may be concerns about Europe again," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

The third-quarter earnings season will kick off on Tuesday with results from Dow component Alcoa Inc. Analysts expect Alcoa to report a break-even quarter, down from a profit of 15 cents per share a year earlier, according to Thomson Reuters data. Alcoa shares rose 0.8 to $9.16.

Recent earnings warnings from large multinationals such as FedEx Corp, Caterpillar Inc and Hewlett-Packard Co, which have cited weakness in Europe and China, have made investors cautious about corporate profits.

"Certainly there has been a lot of downward revisions in earnings in general. Some people are predicting that we may see an overall decline in earnings, so there may be some defensive posturing and profit-taking," Jankovskis said.

According to Thomson Reuters data through Friday, 91 companies in the Standard and Poor's 500 have issued negative outlooks versus 21 positive preannouncements, for a ratio of 4.3, the weakest showing since the third quarter of 2001.

The Dow Jones industrial average dropped 43.47 points, or 0.32 percent, to 13,566.68. The Standard and Poor's 500 Index lost 6.71 points, or 0.46 percent, to 1,454.22. The Nasdaq Composite Index fell 22.79 points, or 0.73 percent, to 3,113.39.