NEW YORK, Sept 27: US stocks fell to one-month lows on Friday on worries about upcoming quarterly earnings news, while bond prices rose sharply, pushing the benchmark 10-year note’s yield to a two-month low.

Mixed economic reports kept optimism about the recovery in check.

The dollar slipped against the yen, failing to garner sustained support from veiled threats by Japanese officials to intervene to weaken the yen.

A surge in companies lowering the bar on their earnings outlooks this week has helped dampen hopes that a sustainable recovery in the US corporate sector is under way.

Everyone’s in a wait-and-see mode on third-quarter earnings, said Stephen Massocca, head of trading and president of Pacific Growth Equities. There’s a perception that stocks are overvalued, and that’s holding the market back.

The Commerce Department said that brisk consumer spending helped the US economy grow at a slightly faster-than-expected pace, setting the stage for a second-half surge in growth. Gross domestic product grew at a revised 3.3 per cent annual rate from April through June — up from a 3.1 per cent rate estimated a month ago.

A University of Michigan survey, however, showed consumer sentiment fell unexpectedly in September, hurt by persistent weakness in the job market, high gasoline prices and the US occupation in Iraq.

The Dow Jones industrial average fell 30.88 points, or 0.33 per cent, to 9,313.08, while the broader Standard & Poor’s 500 Index dropped 6.42 points, or 0.64 per cent, to 996.85. The technology-laced Nasdaq Composite Index dropped 25.17 points, or 1.39 per cent, to 1,792.07, based on the latest available figures.

Motorola Inc. topped the New York Stock Exchange’s most actively traded list. Its shares fell on news that it will not be able to supply two popular digital camera cell phone models in time to meet expected high demand in this year’s US holiday season, one of its biggest customers said on Friday.

But by the close, Motorola’s stock had recouped those losses and ended flat at $12.53, after the world’s No. 2 cell phone maker said it is positioned for the crucial holiday season and reiterated its forecast.

Treasury yields, which move inversely to prices, dropped to two-month lows on worries that nervous Americans might tighten their belts.

The 10-year note gained 23/32 in price to 102-00/32, while its yield dropped to 4 per cent from 4.09 per cent the previous session and 4.16 per cent last week.

The two-year note, meanwhile, rose 6/32 to a price of 100-04/32, pushing its yield down to 1.56 per cent from 1.67 per cent last Friday.

The 30-year bond climbed 27/32 to a price of 106-18/32, while its yield slid to 4.94 per cent from 5.07 per cent last week.

In the foreign-exchange markets, the possibility of yen-weakening intervention is likely to remain currency traders’ key preoccupation next week, analysts said.

Everybody is trying to figure out on the yen, what impact (Japan’s) fiscal half year end is going to have and whether the (Bank of Japan) will intervene after that or not, said Lara Rhame, senior economist with Brown Brothers Harriman in New York.—Reuters