* Goldman Sachs' earnings slide 82 percent in 2nd quarter
* Euro reverses after a two-month high against dollar
* Two-year Treasury yield hits record low of 0.5764 pct
(Updates with U.S. markets, changes byline, dateline, previous
LONDON)
By Jennifer Ablan and Jeremy Gaunt
NEW YORK/LONDON, July 20 (Reuters) - World stocks dropped
and Treasuries prices rallied on Tuesday after
lower-than-estimated revenue at Goldman Sachs Group Inc <GS.N>
and a drop in U.S. housing starts intensified worries the U.S.
economic recovery was losing momentum.
Goldman Sachs' earnings slid 82 percent in the second
quarter, hampered by its settlement with the U.S. Securities
and Exchange Commission and the UK's payroll tax. Profit
dropped to $613 million from $3.44 billion, while revenue slid
36 percent to $8.84 billion. For more details see
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The heavyweight investment bank followed technology
bellwethers International Business Machines Corp. <IBM.N> and
Texas Instruments Inc. <TXN.N> in posting quarterly revenue
that fell shy of expectations.
"Both the stock and bond markets are telling you that we
are in for sluggish growth," said Margaret Patel, the senior
portfolio manager at Wells Fargo Funds who oversees both
equities and fixed-income assets.
Economic data on housing didn't help the sour sentiment.
U.S. housing starts hit their lowest level in eight months
in June, but a rise in building permits offered hope that
homebuilding was poised to pick up.
The Commerce Department said on Tuesday housing starts
dropped 5.0 percent to a seasonally adjusted annual rate of
549,000 units, the lowest since October. It was the second
straight month of declines in groundbreaking activity and was
well below market expectations for a 580,000-unit rate.
During the first hour of New York trading, the Dow Jones
industrial average <> was down 106.26 points, or 1.05
percent, at 10,048.17. The benchmark Standard & Poor's 500
Index <.SPX> was down 10.03 points, or 0.94 percent, at
1,061.22. The Nasdaq Composite Index <> was down 32.75
points, or 1.49 percent, at 2,165.48.
World stocks as measured by MSCI <.MIWD00000PUS> were down
0.5 percent and the Thomson Reuters global stock index
<.TRXFLDGLPU> was down 0.44 percent.
European stocks were heading for a five-day losing streak
with the pan-European FTSEurofirst 300 <> down 0.16
percent. Japan's benchmark Nikkei stock index <> shedding
1.15 percent, reflecting investor concern about a U.S.
slowdown.
Investor sentiment was also undermined when Hungary sold
less of its debt than expected, days after its talks with
international lenders were suspended.
EURO TAKES A BREATHER
The euro was lower, reversing a climb to its highest
against the dollar in more than two months.
It retreated from $1.3029 hit on trading platform EBS as
some investors questioned whether the single currency would
sustain gains above $1.30, given that bank stress test results
due on Friday may reveal weakness in euro zone financial
institutions.
The poor demand at Hungary's debt offer also stung the euro
as it weighed on risk sentiment.
"We've seen risk appetite claw back a fair amount, and the
market is questioning whether that move is valid," said Jane
Foley, director of research at Forex.com.
In New York trading, the euro <EUR=> was down 0.43 percent
at $1.2884 from a previous session close of $1.2940.
The dollar was higher against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.3 percent at 82.757 from a previous session close of
82.513. Against the Japanese yen, the dollar <JPY=> was up 0.33
percent at 87.05 from a previous session close of 86.730.
U.S. Treasury debt prices were higher, with the yield on
the two-year note reaching a record low.
The two-year Treasury note <US2YT=RR> yield briefly touched
a low of 0.5764 percent, according to Reuters data. It was last
trading unchanged in price and yielding 0.59 percent, down from
0.60 percent late on Monday.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
14/32, with the yield at 2.91 percent, while the 30-year U.S.
Treasury bond <US30YT=RR> was up 16/32, with the yield at 3.95
percent.
In energy and commodities prices, U.S. light sweet crude oil
<CLc1> rose 0.2 percent to $76.67 per barrel, and spot gold
prices <XAU=> gained $3.65, or 0.31 percent, to $1186.80. The
Reuters/Jefferies CRB Index <.CRB> was down 0.1 points percent
at 261.07.
(Additional reporting by Emily Flitter in New York and Tamawa
Desai, Naomi Tajitsu and Harpreet Bhal in London; Editing by
Padraic Cassidy)
