[R]4:00PM New York, 10:00PM Frankfurt, 1:30 AM Mumbai – New York rallied in the morning hours on profit from General Motors and Sun Microsystems. By the afternoon, averages lost nearly 2% to turn gains of the day to a loss. European markets closed higher ahead of sell-off. Asian markets rallied across the region.[/R]

Dow Jones declined 146.32 to 13,211.99, Nasdaq lost 37.01 to 2,546.27, and S&P 500 erased 18.64 to 1,455.27.

FTSE 100 Index in the U.K. closed up 154.00 to 6,360.10, in Tokyo Nikkei 225 closed at 17,249.89, down 40.41, and Brazil iBovespa lost 390.11 to close at 54,182.50.

Yields edged lower on 10-year U.S. bonds and closed at 4.78% and 30-year bond rose to close at 4.93%.

Crude oil increased $1.38 to close at $78.21 per barrel, natural gas closed 31 cents lower to $6.19 per mBtu, and gasoline futures increased 5.5 cents to close at 214.08 cents per gallon.

Gold traded higher $2.70 to close at $679.30 per ounce, silver increased 11 cents to close at $13.01 per ounce, and copper futures gained $94 to close at $7,943 per metric ton.

News on housing market, earnings from General Motors and Sun Microsystems, and worries related to housing mortgage market continued to roil market sentiment. The late afternoon sell-off left averages sharply lower reminding investors that more volatility and sells may be followed. American Home Mortgage Investment reopened after halt in trading lasting longer than one day to see 89% loss in the market value. The company said that it can not fund its losses in the subprime market and may have to liquidate the company. Radian Group and MGIC Investment reported substantial loss exposure to subprime markets.

General Motors jumped 2.5% but closed lower after reporting profit on international operations and Sun Microsystems jumped 4% after reporting a profit and Alcatel Lucent fell 12.5% after reporting a loss.

Asian Markets closed higher except those in Japan and Thailand. Taiwan and Indonesia led the region with a gain of 2% followed by near 2% rise in Hong Kong and India. South Korean and Malaysia advanced 1.4% and Philippines and Singapore increased near 0.6%.

June unemployment fell to 3.7% from 3.8% in May and total monthly wages fell 1.1% from a year ago. The report also showed that available jobs to the number of applicants ratio increased to 1.07 from 1.06 in May. In a separate report, the government also reported that the overall household spending in the month gained 0.1%, lower than expected rise of 0.7%. Last week, the government reported that June retail sales fell 0.4% and supermarket sales keep declining for 18 consecutive months. Earnings from Nikon, Mitsubishi Corp, Olympus, and Shinsei Corp lifted select stocks.

Latin American Markets fell led by 0.8% decline in Brazil followed by 0.71% fall in Mexico, 0.3% decline in Argentina, and 0.1% loss in Chile.


[R]1:00PM NY, 5:00 PM Frankfurt European markets rallied, boosted by financial and airline stocks.[/R]

European stock markets rebounded from recent weakness to post their best one-day gains since the middle of March. Stocks were led higher by strong financial sector, as positive earnings and deal news managed to offset continued credit-markets concerns. The U.K. surged 2.5% at 6,360.10, France jumped 1.9%, and Germany climbed 1.7%.

In Frankfurt insurance firms advanced, with shares of Allianz rising 2.9%. Deutsche Bank posted gains of 4%. Car makers also moved notably higher, with Volkswagen advancing 3.2% and Porsche moving up 4.2%. Shares of German truck maker Man rose 4.3% after it posted higher first-half net income as sales increased 12%.

In Paris insurance stocks also advanced, with shares of AXA up 2.9%. On the side of the losers, Alcatel-Lucent dropped 9.3% after the world's largest maker of telecoms equipment posted a bigger-than-forecast Q2 loss.

In London financials gave a strong boost, with shares of retail banking giant Lloyds TSB rising 4.4% after it agreed to sell its Abbey Life Assurance unit to Deutsche Bank for 977 million pounds in cash. Besides, Lloyds TSB said its first-half net profit rose 26% and also raised its dividend payout for the first time in five years.

Among other stocks in focus, hedge fund manager Man Group was up 4%, while property firm Land Securities jumped 3.6%. Airlines also stood out among gainers. Ryanair jumped 11.6% as the low-cost carrier reported a 20% increase in quarterly profit, while rival EasyJet climbed 12.9% after an upgrade at Goldman Sachs. Drug maker GlaxoSmithKline rose 3.3%


[R]11:30AM U.S. market averages erased some of the earlier gains amid cautiousness.[/R]