U.S. stocks face a volatile week with a torrent of earnings due, facing up against concern about the economy's underlying strength.

Markets tumbled Friday as a decline in consumer sentiment added to the disappointment over weaker than expected second quarter revenue at Bank of America, Citigroup and General Electric.

This week is the first peak week of second quarter earnings season, with more than one third of the Dow Jones Industrial Average components and one fifth of the companies in the Standard & Poor's 500 Index reporting. Sales of existing homes and housing starts both likely declined in June, according to a poll of economists before those figures are released thist week.

And President Barack Obama is scheduled to sign historic financial reform legislation Wednesday. Investment banks Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) are expected to report lackluster second quarter results Tuesday and Wednesday, respectively, following turbulent markets and desiccated business demand.

The biggest dent to the investment banks has been the erosion of fixed income markets, which have been one of the biggest profit drivers as Wall Street recovered from the financial crisis.

On Friday, the Dow Jones Industrial Average dropped 261.41 points, or 2.52%, to 10097.90, its biggest drop this month. For the week, the Dow fell 0.98%, marking its third week in the red out of the past four.

The measure is still up 3.31% for the month but down 3.17% for the year. All of the Dow's 30 components fell Friday, led by Bank of America, which tumbled 1.41, or 9.2%, to 13.98.

BofA was the Dow's worst performer last week, with a drop of 7.5% during the period. The big bank's second quarter earnings report revealed a jarring mix of falling profit and an estimate that Congress's just passed financial reform bill could hit the Charlotte based bank for more than $10 billion by the end of next year. Revenue dropped 11% to $29.15 billion, below analysts' estimate for $29.75 billion.

General Electric declined 70 cents, or 4.6%, to 14.55.

The conglomerate's second quarter earnings rose 16%, marking the company's first profit growth in nine quarters, or since the financial crisis began.

But revenue slipped 4.3% to $37.44 billion and came in short of analysts' consensus $38.37 billion view. GE blamed the trend on downsizing at GE Capital as well as lower industrial equipment sales and dispositions of some industrial assets.

Adding to the investors' worries, a key reading on consumer sentiment came in well below the prior reading as well as expectations, indicating consumer sentiment levels hit a wall as of mid-July.

International Business Machines Corp. (IBM), which reports Monday, and Microsoft Corp. (MSFT), on Thursday, are expected to benefit from a rebound in demand for technology from consumers and businesses. IBM has been gaining in recent years from its shift toward software and services and away from hardware.

Microsoft, which faces a number of long term threats to its business, plans to focus on launching new products and improving profitability, although it has so far been unable to capitalize on new technologies such as wireless and digital music.

Economists surveyed by Dow Jones see June housing starts declining 3.5% and existing home sales falling 9.2% from a month earlier. The government will report on housing starts Tuesday, and the National Association of Realtors issues home sales statistics Thursday.

Both figures rose in March and April as tax incentives spurred home sales before the April 30 deadline. The National Association of Home Builders will issue its July housing market index Monday.

On Thursday, the nonprofit Conference Board releases its June index of leading indicators.

European market

European stocks fell sharply Friday, as mixed sets of bank earnings reports and deteriorating U.S. consumer confidence weighed on equities on both sides of the Atlantic. The Stoxx Europe 600 index ended down 1.9% to 248.11.

The Dow Jones Industrial Average also posted losses. U.S. consumer sentiment tumbled in early July, according to a survey released by Reuters and the University of Michigan.

The sentiment index fell to 66.5 in July from 76 in late June, as consumers fretted about high unemployment and the economy. U.S. earnings on Friday were a mixed bag.

Second quarter profit at banking giant Citigroup slipped to $2.7 billion from $4.3 billion in the year ago period. Profit at rival Bank of America dipped 3% to $3.1 billion. And while quarterly profit at General Electric Co. climbed 16%, the firm's revenue dropped and missed analyst expectations.

European financial stocks came under heavy selling pressure. Deutsche Bank AG fell 2.9% and Barclays PLC tumbled 5.2%.

In France, the CAC-40 index fell 2.3% to 3,500.16 and the FTSE 100 index declined 1% to 5,158.85. In Germany, the DAX index fell 1.8% to 6,040.27, led lower by the utilities sector.

Shares of RWE AG fell 4.3% and those of E.On AG tumbled 5% after details emerged on the proposed German tax on nuclear power station operators.

The tax will likely raise EUR2.3 billion per year as long as nuclear reactors operate and it's based on a charge on nuclear fuel, Reuters reported, citing a finance ministry draft law. Goldman reiterated its conviction of a sell rating on RWE and also said there were earnings risks as a result of the tax for E.On as well.

Shares of German premium car maker Daimler AG edged down 0.5%. The firm reported a return to operating profit in the second quarter and an increase in revenue, but the shares failed to rally on the news.

Shares of BP gained 1.3% in London trading after the firm successfully stemmed the flow of oil from its ruptured well in the Gulf of Mexico.

Most airline stocks reversed early gains to end lower, even as several of them received rating upgrades. Societe Generale upgraded to buy from hold its ratings on Air France-KLM, British Airways and Deutsche Lufthansa.

The broker also reiterated its buy ratings on easyJet PLC and Ryanair Holdings. Shares of British Airways edged up 0.1%, while those of Air France-KLM fell 2%. Lufthansa shares fell 1.9%. Shares of easyJet rose 1.7% after strategists at Goldman Sachs upgraded the stock to buy.

Asian Market

Asian markets ended mostly lower Friday, with Japanese shares tumbling as a strong yen dragged on exporters before a long weekend, while strong results from Tata Consultancy Services supported Indian stocks. Most regional markets started the day on a weak note amid concerns about the U.S. economy and after the U.S. Senate approved a sweeping financial overhaul legislation.

Japan's Nikkei Stock Average tumbled 2.9% for its biggest percentage fall since June 7. Australia's S&P/ASX 200 gave up 0.5%, South Korea's Kospi lost 0.7% and Taiwan's Taiex shed 0.5%.

China's Shanghai Composite and Hong Kong's Hang Seng Index ended flat. Exporters were hit hard in Tokyo, where a public holiday Monday also prompted profit-taking action. Canon (CAJ) lost 3.2% and Sony (SNE) sank 5%, while Nissan Motor (NSANY) declined 3.1%.

Shares of Mitsui & Co. (MITSY) defied the trend in Tokyo to rise 0.4% on news that BP has managed to stop the surge of crude oil from its blown-out well into the Gulf of Mexico for the first time in nearly three months. Mitsui has a stake in the BP operated field.

Shares of Nippon Telegraph & Telephone (NTT) fell 0.9% following its agreement Thursday to buy South African technology services provider Dimension Data Holdings for around $3.23 billion.

Shinsei Bank (SKLKF) slumped 4.6% on lingering worries about the lender's low capital buffer and concerns ahead of the end of July deadline for it to submit a business improvement plan to the Financial Services Agency.

In Hong Kong, Agricultural Bank of China made a slightly stronger debut than its Shanghai-listing Thursday. The stock climbed 2.2% to 3.27 Hong Kong dollars compared with its IPO at HK$3.20. The increase was more than the 0.7% gain recorded by the bank's A-shares the previous day.

The Shanghai listed shares dropped 0.4% to 2.69 yuan (39 cents) Friday. Agbank is still in the running to become the world's largest IPO, subject to an over allotment option that may be exercised by the offering's underwriters.

Chinese property stocks broadly advanced on the mainland, with China Vanke (CVKEY) rising 1.3% in Shenzhen, while Poly Real Estate Group advanced 0.3% and Cinda Real Estate climbed 2.7% in Shanghai.

In Sydney, OZ Minerals tacked on 1.4% after reporting an 18% rise in second quarter gold production from the first quarter and a 25% increase in full year gold production guidance. Fortescue Metals Group shrank 3.8%.

Bloomberg News reported on its website that Russian steelmaker Magnitogorsk Iron & Steel said it may sell, swap or use its 5.4% stake in the Australian company to help finance the development of an iron-ore project.

In Seoul, Samsung Electronics (SSNLF) dropped 2.2% and Hynix Semiconductor (HXSCF) slumped 6.6% on concern about earnings in the second-half of the year.

Commodities

Base metals on the London Metal Exchange closed lower Friday after being dragged down by falling U.S. stocks and renewed concerns over the pace of the economic recovery.

LME three month copper fell more than 3% to its $6,480 a metric ton nadir after hitting early highs Friday of $6,690/ton.

The metal closed the PM kerb at $6,484.50/ton. U.S. markets tumbled Friday after a slew of discouraging corporate earnings and a bleak consumer sentiment report, raising concerns the economy isn't recovering quickly enough to spur corporate growth.

Oil prices sank Friday at the end of a volatile week which saw dealers trying to get a fix on the energy demand outlook amid mixed data.

New York's main contract, light sweet crude for delivery in August, fell 61 cents Friday to finish the week at $76.01 a barrel. London's Brent North Sea crude for September fell 82 cents to settle at $75.37.

Gold futures fell hard Friday, tracking other assets after a drop in consumer sentiment battered stocks and a report showing benign inflation for June offset gold buying on inflation fears.

Gold for August delivery lost $20.10, or 1.7%, to $1,188.20 an ounce on the Comex division of the New York Mercantile Exchange. It was gold's largest one day drop since July 1, and the lowest settlement price since May 21.

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