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US stocks fell on Wednesday as a report from the Federal Reserve pointed to signs that the economic recovery may be running out of steam, adding to the market's disappointment over a drop in durable-goods orders.

The Dow Jones Industrial Average dropped 39.81 points to 10,497.88, snapping a four-day winning streak. Boeing was the measure's worst performer with a drop of $1.30 to $67.32, after the defence contractor and airplane maker posted second-quarter revenue below analysts' expectations and warned it is likely to cut jobs in a defence unit facing increasing budget pressures from the Pentagon and overseas customers. The Nasdaq Composite shed 23.69 to 2,264.56. The Standard & Poor's 500 index lost 7.71 to 1,106.13.

The declines followed data showing demand for durable goods slid for a second straight month in June, another sign of weakness for US manufacturing and the overall economy. In addition, the Fed said in its latest beige book report that economic conditions continued to improve in most of its 12 regional districts, but the advances were modest, with retail sales posting only small gains and housing and construction remaining weak. Bank lending, meanwhile, was still tight.

WellPoint slipped $1.97 to $50.83. The managed-care provider's second-quarter profit rose 4% on lower claims costs, but operating revenue came in short of analysts' estimates.

Las Vegas Sands climbed $1.41 to $26.69. The casino and resorts owner swung to a second-quarter profit, topping analysts' expectations due in part to a strong showing by its newly opened Singapore property.

CH Robinson Worldwide jumped 6% to $64.87. The trucking company's second-quarter profit increased 5.4%, topping Wall Street's expectations on higher load volume.

International Paper fell 5.4% to $24.12. The paper and packaging company's second-quarter revenue slightly missed analysts' estimates, and Chief Executive John Faraci predicted growth would moderate in the second half of 2010.

Most European shares dropped on Wednesday, breaking a six-session winning streak, as an unexpected decline in US durable-goods orders rekindled worries over economic growth and outweighed positive earnings reports from companies including Infineon Technologies and Deutsche Boerse.

A notable exception to the broad-based losses was Portugal, where the PSI-20 stock index ended up 1% after Portugal Telecom agreed to sell its stake in Brazil's Vivo Participacoes to Spain's Telefonica for EUR7.5bn.

The Stoxx Europe 600 index fell 0.4% to 257.21 points. It closed at a level not seen for more than five weeks on Tuesday and started today's session with gains, but disappointing economic news prompted traders to reverse direction.

Orders for new US-made durable goods fell 1% in June, the second straight monthly decline and the biggest drop in 10 months, data showed. Economists had expected 1% growth.

Although shares have been advancing lately, the Stoxx Europe 600 index is still off by around 6% from a twelve-month closing high of 272.14 hit on April 15.

PSA Peugeot Citroen swung to a first-half net profit of EUR680m, but management warned that the automotive division is expected to be close to breakeven in the second half. Shares of the carmaker dropped 4.1%.

Steel giant ArcelorMittal, whose shares fell 2.1%, said that earnings in the coming months would be hit by a slowdown in demand from China..

Asian markets ended mostly higher, with Japanese stocks charging ahead as solid corporate earnings from Canon put some extra gloss on the already better outlook for exporters. Japan's Nikkei Stock Average was the best performer of the region, surging 2.7% as Canon soared 5.7% on the back of its quarterly results on Tuesday. China's Shanghai Composite climbed 2.3% to finish at a two-month high and Hong Kong's Hang Seng Index gained 0.6%.

Base metals on the London Metal Exchange closed higher as positive comments from China regarding its economic growth outlook continued to provide upward pressure despite disappointing US data. Aluminium raised $13 to $2,070 while copper firmed $90 to $7,175 and nickel fell $80 to $20,450. Zinc added $45 to $1,955 and lead strengthened $45 to $2,015. Comex copper was last quoted at 324.00 US cents per pound.

Gold futures edged higher on Wednesday, rising above three-month lows on bargain buying but showing little direction as demand for refuge assets remains low. Spot gold was last quoted at $1,162.35. Comex gold futures increased $4.40 to $1,162.40. Spot silver was last quoted at $17.47.

Crude fell slightly as mixed economic data and a report on US oil inventories kept traders wary about demand in a sluggish recovery. West Texas Intermediate was last quoted at $76.99 per barrel.

At 07:45 a.m. (AET) the US dollar was quoted 1.123 AUD.

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