* U.S. stocks fall as Chevron warning fuels profit jitters
* Bonds rally on signs of floundering U.S. economy
* Oil falls below $60 in biggest weekly drop since January
* Yen, dollar gain as U.S. consumer sentiment sours
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 10 (Reuters) - Flagging U.S. consumer
sentiment and a Chevron profit warning fed jitters about an
economic recovery on Friday, knocking down global stocks and
oil prices while boosting the safe-haven appeal of the dollar
and government debt.
U.S. crude prices slid below $59 a barrel in their biggest
weekly decline since late January, while both the Dow and S&P
500, along with European shares, notched a fourth straight week
of losses.
Crude's 10 percent slide this week has underscored worries
that the recovery will be weaker than originally hoped and that
second-quarter corporate results, which are just starting to be
released, are unlikely to surprise much on the upside.
U.S. consumers' moods soured in early July on persistent
worries about jobs, the Reuters/University of Michigan Surveys
of Consumers showed, offering little hope that consumer
spending will help a sputtering economy.
"The Michigan number was a bit of a disappointment," said
Mike Lenhoff, chief strategist at Brewin Dolphin Securities in
London.
Some economic data points have failed to meet expectations
the economy will pick up this year, said Cleveland Rueckert,
market analyst at Birinyi Associates in Stamford, Connecticut.
"People are starting to question whether the economic
recovery is going to take place in the latter part of this year
or whether it's going to come next year," Rueckert said.
The disappointing outlook late Thursday from Chevron Corp
<CVX.N>, the second-largest U.S. oil company, set the tone for
equity markets worldwide.
MSCI's all-country world index <.MIWD00000PUS> fell 0.6
percent. Chevron fell 2.7 percent, the top Dow decliner.
Few companies will raise their outlooks during this
reporting season, said David Katz, chief investment officer at
Matrix Asset Advisors in New York.
"There's no incentive to step up and talk up the future,
especially because there's low visibility," Katz said. "Our
expectation is that companies are going to do what they've been
doing: beating expectations but setting a low bar and being
cautious."
The Dow Jones industrial average <> closed down 36.65
points, or 0.45 percent, at 8,146.52 and The Standard & Poor's
500 Index <.SPX> slid 3.55 points, or 0.40 percent, at 879.13.
But the Nasdaq Composite Index <> rose 3.48 points, or
0.20 percent, at 1,756.03 as the tech-rich Nasdaq outperformed
the wider market.
Goldman Sachs upgraded the U.S. hardware and software
sectors to "attractive" from "neutral," citing potential growth
in demand from businesses.
In Europe, the FTSEurofirst 300 <> index of top
regional shares fell 1.1 percent to close at 814.29 points, its
lowest close in more than 10 weeks.
Oil fell in the sixth of the last seven trading sessions.
U.S. crude <CLc1> settled down 52 cents to $59.89 a barrel,
while London Brent crude <LCOc1> fell 58 cents to settle at
$60.52 a barrel.
"The mood has changed and people are losing confidence
about the economic recovery," said Simon Wardell at IHS Global
Insight. "We are in one of those phases where no matter what
happens in other markets oil will go down."
U.S. Treasuries rallied, pushing benchmark yields to
seven-week lows, as investors jumped back into debt on relief
the market digested this week's sale of $73 billion in
long-dated supply without much of a hitch. []
"The recession hasn't really bottomed out," said Anne Ruff,
a portfolio manager with Rydex Investments in Rockville,
Maryland. "The bond market should continue to rally."
New York gold futures finished lower in light trade as
worries about economic growth reduced bullion's appeal as an
inflation hedge. Most other commodities also fell.
The August contract <GCQ9> settled down $3.70 at $912.50 an
ounce in New York.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
31/32 in price to yield 3.3 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 2/32 in price to yield 0.89 percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.47 percent at 80.243. Against
the yen, the dollar <JPY=> was down 0.58 percent at 92.39.
The euro <EUR=> was down 0.55 percent at $1.3947.
Amid the gloomy outlook, rates on dollar, euro and sterling
funds that banks lend among themselves eased again, with
benchmark three-month rates hitting record lows as money
markets remained flush with central bank liquidity.
"They're going to keep an ultra accommodative policy in
place ... and supply whatever liquidity that is necessary,"
said Sean Maloney, rate strategist at Nomura in London.
Uncertainty over earnings and the prospect for economic
recovery led Asian shares lower, with Japanese shares sliding
to near seven-week lows.
Japan's Nikkei average <> shed just 0.04 percent,
falling for an eighth straight session, while MSCI's measure of
stocks elsewhere in the Asia-Pacific region <.MIAPJ0000PUS>
edged up during the Asia session, but later fell 0.4 percent.
(Reporting by Ed Krudy, Ellis Mnyandu, Matthew Robinson,
Steven C. Johnson, Richard Leong and Ellen Freilich in New
York; Brian Gorman and Emelia Sithole-Matarise in London;
writing by Herbert Lash)
