US stocks retreated on Tuesday, tracking a slide in investor sentiment as crude prices approached US$120 per barrel. Adding to the downside, many of the country’s blue chip heavyweights came to the market with unimpressive quarterly results.

The Dow fell 104.79, or 0.82 per cent to 12720.23, while the broader S&P 500 shed 12.23, or 0.88 per cent to 1375.94. The Nasdaq dropped 31.10, or 1.29 per cent to 2376.94.

The unrelenting surge in crude prices dominated the session and created a grim backdrop for the day’s activity.

NYMEX light crude oil for May delivery rose US$1.89 to settle at a record US$119.37 a barrel after hitting an all-time trading high of US$119.90 a barrel earlier in the session.

Many worried that crude’s record shattering run would increase business costs, reduce profits, as well as dampening both consumer sentiment and consumer spending, further weakening an already fragile economic backdrop.

Adding to these concerns, data showed that March existing home sales fell 2 per cent to a 4.93 million annualised rate from the previous reading of 5.03 million.

Tuesday’s onslaught of earnings reports and outlook announcements only served to deepen investor anxiety.

After the close of trade on Monday, Texas Instruments reported higher quarterly earnings that met estimates. But the chipmaker also forecast current-quarter profit that was short of most estimates, citing weaker demand.

After suffering several analyst downgrades the company’s shares closed 5.8 per cent lower on Tuesday.

Dow heavyweight DuPont fell 4 per cent despite reporting higher quarterly sales and earnings that topped estimates. While the chemical maker cited higher prices and the benefit of the weak dollar and reiterated its 2008 earnings forecast, it also warned that the weaker US economy would offset any gains from global markets.

Meanwhile, UnitedHealth Group lost nearly 10 per cent after cutting its 2008 forecast due to higher flu costs and projected membership declines. The company also reported higher quarterly earnings, but the numbers missed forecasts despite estimate topping revenue.

Meanwhile UAL, the parent of United Airlines, led the list of carriers reporting large quarterly losses due to surging fuel costs. The company’s shares tumbled 36.7 per cent on the news.

A number of companies were caught up in the sell off, unable to trade higher even after reporting forecast beating results.

McDonald's reported higher quarterly sales and earnings that beat forecasts due to strong global sales and the weak dollar, but its shares ended 0.6 per cent lower.

Apple’s shares fell 4.7 per cent after the company endured a broker downgrade in the run up to its earnings announcement, which is slated for Wednesday.

On a slim upside, AT&T announced higher quarterly sales and earnings that were in line with expectations, thanks to growth in its wireless division. The Dow component’s shares managed a modest 0.6 per cent gain.

Elsewhere, COMEX gold for June delivery gained US$7.60 to US$925.20 per ounce.

UK markets

London shares closed lower, as weakness in the banks continued after the Royal Bank of Scotland said it would sell new shares to boost capital. Meanwhile, house builders tumbled as the sector’s biggest player dropped on a broker downgrade.

The benchmark FTSE 100 fell 18.30, or 0.30 per cent to 6034.70.

Royal Bank of Scotland lost 3.9 per cent after revealing a record 12 billion pound rights issue to cover 5.9 billion pounds in write downs.

Britain's second biggest bank said it would also sell assets to generate 4 billion pounds in core capital this year and would consider selling its insurance unit, which includes the Direct Line and Churchill brands.

Barclays dropped 3.7 per cent ahead of tomorrow’s annual shareholders meeting. Speculation was mounting that Barclays would use the meeting to announce that, like RBS, it too was looking at its capital targets.

HBOS fell 3.7 per cent amid concerns it might require funds if it was also forced to write down the value of mortgage assets.

Shares of Lloyds TSB Group managed to outperform, down just 0.6 per cent.

House builders came under pressure following a Merrill Lynch note in which the broker cut its ratings on Barratt Developments, which fell 5 per cent.

The rumble was heard throughout the sector, with Redrow off 2.2 per cent, Bovis Homes slipping 3.6 per cent and Taylor Wimpey stumbling 5.6 per cent to the finish.

Persimmon also fell, dropping 5.3 per cent even though Merrills left a buy rating on the company.

Merrill Lynch didn’t limit its sour views to just the homebuilders, the broker also downgraded European non-food retail shares from overweight, citing concern that spending would remain constrained by higher living expenses.

Consumer stocks felt the pinch, with DSG, the owner of about 1,300 consumer electronics stores across Europe, dropping 8.5 per cent. Home Retail, the owner of Argos and Homebase stores in the UK, lost 4.2 per cent.

Oil shares were also mostly higher as world oil prices rose to hit a record high of US$118.85 a barrel. BP traded up 0.4 per cent, Cairn Energy firmed 1.2 per cent and Tullow Oil rose 1.5 per cent.

However, airline stocks did it tough on the news. Especially Ryanair, which fell 5.3 per cent after Morgan Stanley lowered its price estimate for Europe's largest low-cost airline by 39 per cent.

On the upside, Centrica rose 1.5 per cent on news that US billionaire Warren Buffett had built a 3 per cent stake in the parent company of British Gas.

Mining stocks were also strong as metal prices firmed. BHP Billiton and Rio Tinto added 2 per cent and 2.4 per cent respectively, while ENRC jumped 8.7 per cent.

European markets

European shares fell for a second consecutive day as concerns over the state of banks intensified. Talk of a renewed spate of write downs was rife on the Continent after Royal Bank of Scotland unveiled its record rights issue.

France’s CAC 40 fell 37.71, or 0.77 per cent to 4872.64, while Germany’s DAX shed 58.25, or 0.86 per cent to 6728.30.

JPMorgan cut its earnings estimates for European banks and said it was particularly cautious about French banks Credit Agricole and BNP Paribas. Their stocks fell 1 per cent and 1.6 per cent respectively.

Societe Generale eased 0.3 per cent after the broker resumed coverage on the stock and said it had a solid capital position, excellent cash flow generation and a favourable business mix.

Meanwhile, Credit Suisse said Deutsche Bank was next in line for heavy markdowns. Analysts estimated Deutsche Bank might have to mark down by 4.1 billion euros, almost double the 2.5 billion euros write down Deutsche intended to take for the first quarter. Its stocks were down 1.4 per cent.

Norway’s Renewable Energy Corp, which jumped 11 per cent after the solar power group posted a smaller-than-expected drop in first quarter core earnings, dented by high expansion costs.

Shares in Norsk Hydro climbed 1 per cent after reporting underlying earnings of $1.44 billion Norwegian kroner, which roughly matched analyst estimates.

Japanese markets

Japanese stocks slipped 1.1 per cent on Tuesday, dragged down by Nissan and other automakers as the yen firmed and dealers moved to lock in profits after five days of gains. Banks and financials slumped on renewed worries about their US counterparts.

The Nikkei 225 fell 148.73, or 1.09 per cent to 13547.82.

Car manufacturers slipped broadly, hit by profit-taking after recent rises that saw Honda surge nearly 9 per cent on Monday. Shares dropped 2.7 per cent.

Some car firms were also hit by the additional punch of a ratings downgrade.

Nissan and Isuzu Motors both underperformed the weak auto sector after Nikko Citigroup cut its ratings on the two firms, citing the probability of an earnings downturn. Nissan was down 3.6 per cent and Isuzu slipped 4.4 per cent. Toyota ended 2.6 per cent lower.

Mizuho Financial slid 5.1 per cent and No. 3 bank Sumitomo Mitsui Financial Group shed 4.3 per cent. Top lender Mitsubishi UFJ Financial Group was down 2.2 per cent.

Hong Kong markets

Hong Kong shares finished yesterday on a positive note, with mainland shares leading the rally as Shanghai shares rebounded after hitting a 13-month low. The Hong Kong index was driven higher by property developers and oil stocks on the back of higher oil prices.

The benchmark Hang Seng gained 217.48, or 0.88 per cent to 24939.15.

Markets were also fuelled by a 6.5 per cent jump in PetroChina and a 5.1 per cent rise in Sinopec shares.

PetroChina and Sinopec both rose on speculation that Beijing might issue more favourable policies to help them counter the impact of record oil prices. News from Beijing pointed to the possibility of a subsidy to compensate the groups for refining losses.

Hong Kong blue chips were stronger on the whole, but HSBC slipped 0.7 per cent and China Mobile jettisoned 2 per cent after the telecom giant's 37 per cent rise in first-quarter earnings came in slightly below forecasts.

Yangzhou Coal jumped 7.4 per cent after it reported a 36 per cent rise in 2007 earnings on the back of higher coal prices.

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