U.S. MARKET AVERAGES

The main drivers of the market sentiment throughout the morning session have been rising Google, falling Caterpillar and declining crude oil prices. The Nasdaq sustained its 1% gain from the early rally, while the Dow has reached as far as the flat line, dragged down by the $4-decline in share price of its component Caterpillar (CAT: chart). The maker of construction equipment fell after releasing a lowered full-year outlook, despite a 34% profit growth in the third quarter.

Upbeat report with better-than-expected results from Google provided a boost to the market sentiment and good ground for positive expectations. The online search engine reported sevenfold higher third-quarter profit, doubled sales growth, topping estimates.

Energy stocks have drifted higher through the morning, erasing some of yesterday’s losses. Stabilizing utility stocks after Thursday's sell off, pushed the Utilities Index up nearly 1%.

The drug sector is a notable mover to the downside, continuing the Thursday’s slide and is currently at its lowest level since February. Defense stocks are showing modest weakness as well.

SBC (SBC: chart) is climbing 2.4%, following the 2.3% rise of AT&T (T) with which it has a pending merger deal. Hewlett-Packard (HPQ: chart) and DuPont (DD: chart) are showing considerable gains of 1.5% and 1.1%, respectively.

SanDisk (SNDK: chart) has broken to a new 52-week high on news of better-than-expected earnings and a $250 million deal to acquire Matrix Semiconductor.

Caterpillar (CAT: chart) is the most conspicuous decliner in the Dow, falling by more than $5.50, or more than 10%, on disappointing earnings and guidance released before the opening bell. With The stock has reached its lowest level since the first half of July. Caterpillar has also moved below its 200-day moving averages for the first time since April.

Pfizer (PFE: chart) is extending its decline from yesterday, falling another 2.5%. Honeywell (HON: chart), GM (GM: chart) and United Technologies (UTX: chart) are showing notable declines as well.

MOVERS AND SHAKERS

Google Inc. (GOOG: chart) reported third-quarter profit that rose sevenfold and revenue nearly double to go beyond $1 billion for the first time in the company's history. At least nine financial brokers raised their price targets on Google, including Lehman Bros., First Albany and RBC Capital Markets. The company’s stock jumped 13.6%.

Dow component Caterpillar Inc. (CAT: chart) posted a third-quarter profit that was slightly up from analyst expectations. The company reported net income of $667 million, or 94 cents a share, up from $498 million, or 70 cents, for the same period a year ago. Revenue increased 17%, reaching $8.98 billion from $7.66 billion in 2004. The company’s stock fell by 6.9%.

SanDisk Corp. (SNDK: chart) reported a third-quarter profit that went nearly twofold on strong sales of its flash memory products. The company earned $107.5 million, or 55 cents a share, compared to $54.1 million, or 29 cents a share a year ago. Revenue surged to $589.6 million from $408 million. The company’s stock gained 17.3%.

Photocopy specialist Xerox Corp (XRX: chart) commenced a $500 million share buyback program as the company reported third-quarter results that went alongside expectations. The stock added 2.7%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed, reflecting heavy losses, posted on Wall Street overnight. The Nikkei traded lower in the morning, dragged by Toyota Motor and steel stocks, but later Toshiba helped the index rebound to the positive 0.1%. Across the region, South Korea’s Kospi climbed 1.8%, Hong Kong’s Hang Seng added 0.5%, while Australia’s All Ordinaries lost 0.5%.

European markets extended mid-day losses and closed lower, pressured by weak U.S. stocks, slightly disappointing earnings news from the Swedish Ericsson and corporate news from U.K. caterer Compass. The German DAX 30 lost 0.5%, The French CAC 40 declined 0.6%, and London’s FTSE 100 fell 0.4%.

ENERGY, METALS, CURRENCIES

Crude oil dipped below $60 a barrel and natural gas fell to a month-low. The decline is attributable to a huge increase in natural gas and gasoline stocks, lower fuel demand and eased worries over hurricane Wilma. Light sweet crude December contract dropped 52 cents to $59.50 a barrel on the Nymex. Gasoline traded slightly down at $1.6075 a gallon, while heating oil lost 3 cents to $1.841. Natural gas slipped 17 cents to $12.82 per 1,000 cubic feet.

In European trading gold prices declined. In London gold closed at $464.80 per troy ounce, down from $465, while in Zurich it fell to $461.25, down from $461.50. In Hong Kong the precious metal lost $1.20 to close at $462.75. Silver finished unchanged at $7.58.

In European trading the U.S. dollar traded mixed against other major currencies. The euro was quoted at $1.2013, up from $1.1983. The dollar changed hands at 115.67 yen, up from 115.53. The British pound was trading at $1.7742, up from $1.7706.

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