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Intense fear that global debt issues and stagnant growth cannot be resolved has pummeled market confidence in the past couple of months.

Earnings have been one of the market's few positives, coming in strong despite economic woes.

But analysts now are toning down double-digit growth targets for the rest of this year and next on the heels of a record second quarter.

A distressing signal came from FedEx Corp, the world's No. 2 package delivery company, which many on Wall Street look to as an economic bellwether. FedEx lowered its full-year profit outlook this week, citing high fuel costs and a struggling global economy.

Since July 1, the Standard & Poor's 500 Index has tumbled 15 percent. Forecasts for third-quarter earnings for the S&P 500 companies have slipped to 13.7 percent growth from 17 percent, according to Thomson Reuters data. But many strategists say those estimates are still too high.

For next year, S&P 500 earnings-per-share estimates are eyeing $112, which would be a record.

"If that number is anywhere near real, order the champagne now," said Howard Silverblatt, senior index analyst at S&P.

Over the last few weeks, analysts have cut earnings estimates for S&P 500 companies across all sectors except technology. Financials are among the hardest hit.

Negative guidance from companies is also on the rise, outweighing positive guidance by a ratio of more than 2 to 1.

Estimates for the fourth quarter and 2012 are down slightly to around 15.4 percent and 13.5 percent, respectively, and could pull back further as analysts react to more guidance, as well as to critical economic data, including housing and jobs numbers, and a worsening debt crisis in the euro zone.

Profit growth could still be relatively strong for the season that kicks off in early October, and that could lift stocks, which sold off nearly every day this week on panic reminiscent of the financial meltdown in 2008.

The Dow Jones industrial average ended the week down 6.4 percent, its largest weekly percentage loss since October 2008, while the S&P 500 slid 6.6 percent. The Nasdaq Composite Index tumbled 5.3 percent for the week.

"The way things are going, we're going to be in a recession by the end of the fourth quarter," said Barton Biggs, managing partner of New York-based Traxis Partners, in an interview with Reuters Insider.

The mystery lies beyond the third quarter into next year. Strategists speculate that estimates may be inflated by 5 percent to 15 percent as the market questions how far the cost slashing since the last recession can shield the bottom line.

FINANCIALS: THE ACHILLES' HEEL

Financials, worth more than 13 percent of the S&P 500 and the second-most influential group behind technology stocks, have been subjected to drastic cuts in earnings estimates.

"That's obviously the Achilles' heel of the market," said Robbert Van Batenburg, head of equity research at Louis Capital in New York. "Investment banking is probably going to be very moribund, bank lending is still not existing, and there are no gains to be booked at all."

Banks are also suffering from worries about possible write-downs of euro-zone debt and less profitable lending due to the U.S. Federal Reserve's new measures to lower longer-term interest rates.

Financial institutions' shares have been dragged lower in recent days on renewed fears of exposure to European debt. Credit-default swaps, a measure of the cost of insurance against default on long-term debt, have been climbing.

"The wild card here is really the banks. That's really where the earnings for the S&P have been kind of jerked around in the last couple years," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co., in San Francisco.

Insurers are also very susceptible to a lower-rate environment, while energy and consumer discretionary sectors are vulnerable to see-sawing commodity prices and damaged confidence.

For the country's biggest insurers, the Fed's "Operation Twist," designed to stimulate credit for consumers and businesses, could threaten earnings for years to come. The problem is returns on insurers' investment portfolios can't keep pace with the obligations they have accumulated from torrid sales of annuities and life policies.

TECHS BUCK TREND

Tech, meanwhile, has been the sector where forecasts are rising behind powerhouses such as Apple,, whose stock hit an all-time high this week.

The forecast for technology earnings for the full-year 2011 is 16.6 percent growth, compared with 2010, according to Thomson Reuters data released on Friday. In July, the forecast called for growth of 13.7 percent.

Yet even in this healthy sector, a cautionary tale came this week from chipmaker Xilinx, a component of the Philadelphia Semiconductor Index. Xilinx dropped its sales forecast, citing weak industrial markets.

And after a relatively quiet few days on the economic calendar, the flow of data will pick up next week with reports on housing, factory activity, consumer spending and the broader economy. New home sales for August are due on Monday, followed by the consumer confidence index on Tuesday.

Durable goods orders for August will be released on Wednesday, giving an indication of demand for manufactured items like refrigerators meant to last three years or more. On Thursday, the government will release its final reading on growth of second-quarter gross domestic product. On Friday, August personal income and spending data will come out, as well as the final reading on September consumer sentiment from the Reuters/University of Michigan surveys.

(Reporting by Claire Sibonney; Editing by Jan Paschal)

Changes that will see that part of the bank's operations adopt a less risky business model would be pushed through faster, its chairman said, and Europe, Middle East and Africa head Sergio Ermotti would replace Gruebel on an interim basis.

"Oswald Gruebel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity," Chairman Kaspar Villiger said in a statement.

Gruebel, a 67-year-old former trader who helped turn around Credit Suisse a decade ago, was brought out of retirement in 2009 to try to revamp UBS after it almost collapsed in 2008 under the weight of more than $50 billion lost on toxic assets.

Ermotti, a 51 year-old from Switzerland's Italian-speaking region of Ticino, was already being groomed as a possible successor since he joined UBS in April from UniCredit after he was passed over in a management reshuffle at the Italian bank following the departure of CEO Alessandro Profumo.

The board statement made no mention of the fate of investment bank boss Carsten Kengeter, whose future had also hung in the balance over the trading loss in his division.

The UBS board, which continued a meeting by telephone conference on Saturday that had started in Singapore this week, said it was "deeply disappointed" by the trading scandal.

"It will fully support the independent investigation and will ensure that mitigating measures are implemented to prevent such an incident from recurring," it said.

UBS trader Kweku Adoboli was "sorry beyond words for what had happened" and was "appalled at the scale of the consequences of his disastrous miscalculations," his lawyer Patrick Gibb said at a court hearing in London on Thursday.

The 31-year old did not enter a plea and was remanded in custody until a further hearing next month.

LESS RISKY INVESTMENT BANK

The board reconfirmed the bank's "integrated" strategy, combining wealth management, investment bank, asset management and Swiss retail and corporate businesses, but said it wanted to speed up a restructuring of investment banking.

The board said it had asked management to accelerate the implementation of a client-centric strategy for the investment bank "concentrating on advisory, capital markets, and client flow and solutions businesses," but gave no further details.

"In the future, the Investment Bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS's overall objectives," Villiger said.

UBS had already said in August it would axe 3,500 more jobs to shave 2 billion Swiss francs off annual costs, with almost half of those cuts coming from the investment bank, which had grown to almost 18,000 staff from 16,500 a year ago.

Clients pulled nearly 400 billion Swiss francs ($442 billion) -- almost 20 percent of total client assets -- from UBS after the bank was battered in the financial crisis as well as a prolonged dispute with the U.S. tax authorities and posted the biggest annual corporate loss in Swiss history.

Villiger said Gruebel had achieved an "impressive turnaround and strengthened UBS fundamentally." But other private banks are now circling again to nab clients worried about reputational risk in the wake of the rogue trader affair.

UBS's largest shareholder, Singapore sovereign wealth fund GIC, met the bank's management earlier in the week and in a rare public statement expressed its disappointment. It urged them to take firm action to restore confidence and wanted details of how the bank would tighten risk controls.

The board said it would continue to look for a permanent successor to Gruebel. Villiger thanked Ermotti for standing in on an interim basis, adding: "With his extensive industry experience and together with the executive leadership team he will continue to implement UBS"s strategic alignment."

Ermotti has worked in all UBS's core business areas: as UniCredit deputy CEO he had responsibility for corporate and investment banking as well as private banking and at Merrill Lynch he led equity markets activities globally.

UBS's board meeting, one of four regular ones per year, had originally been due to end on Friday ahead of the UBS-sponsored Singapore Formula One motor racing Grand Prix on Sunday, when executives will be trying to reassure big clients.

In 2007, former UBS CEO Peter Wuffli was ousted unceremoniously at a board meeting in Spain to coincide with the America's Cup yachting event there, in which UBS was sponsoring a team.

The loss allegedly caused by Adoboli in unauthorized trades compares to the 4.9 billion euros ($6.6 billion) lost by rogue trader Jerome Kerviel at Societe Generale three years ago, an event that prompted calls for tighter rules and felled that bank's then-chairman and CEO Daniel Bouton.

($1=0.906 Swiss francs=0.743 euros)

(Reporting by Emma Thomasson; Editing by Ed Lane, John Stonestreet)

Trading was volatile, capping one of the most tumultuous weeks on record for world markets as fear of a Greek default and a gloomy Federal Reserve prognosis for the U.S. economy sparked a sell-off in stocks and commodities and drove investors to the safe-haven U.S. dollar and Treasuries.

A pledge by G20 policy makers that they will calm the global financial system failed to appease investors, who are concerned that authorities are unable to respond effectively to the mounting euro zone debt crisis and sluggish growth in major world economies.

Gold slumped more than 6 percent at one point -- its biggest drop since the financial crisis in 2008 -- to hit its lowest since early August as a slide turned into a free-fall, with weeks of volatility and talk of hedge fund liquidation wrecking its safe-haven status.

"The bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago.

"In the near-term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilizes, I'm staying out of this market."

Spot gold was last at $1,649 an ounce, after falling to a session low under $1,628. At $127 an ounce, the intraday move was the biggest on record in dollar terms.

U.S. stocks ended higher after seesawing between gains and losses, stopping the bleeding after a disastrous four days of selling marred by severe anxiety.

Comments from European Central Bank Governing Council member Ewald Nowotny, who said it might be advisable for the central bank to add more liquidity to European banks helped lift sentiment.

The Dow Jones industrial average ended up 37.65 points, or 0.35 percent, at 10,771.48. The Standard & Poor's 500 Index was up 6.87 points, or 0.61 percent, at 1,136.43. The Nasdaq Composite Index was up 27.56 points, or 1.12 percent, at 2,483.23.

Global stocks as measured by the MSCI All-Country index were up 0.2 percent, after hitting their lowest level since July 2010 at 274.20.

The index is now in bear market territory -- defined as a fall of 20 percent or more from the peak -- having tumbled more than 22 percent from its 2011 high in May.

"Financial markets are sick and tired of the authorities in Europe and in the U.S. twiddling their thumbs and not doing substantive things to solve this crisis of the global economy," said Barton Biggs, managing partner at New York-based Traxis Partners.

The FTSEurofirst 300 index ended up 0.8 percent. Emerging markets stocks slid 1.6 percent.

COMMODITIES ROUT

Liquidity comments from ECB officials and speculation the central bank may cut rates helped sentiment initially, but uncertainty about Greece remained.

Greece denied reports that one option in its debt crisis would be an orderly default with a 50 percent haircut, while Deutsche Bank warned that European banks' write-downs on Greek bonds could exceed 25 percent.

Metals prices plunged across the board. Silver prices posted their biggest drop since 2006. Spot silver was down 15 percent and trading below $35.76 an ounce after hitting a session low of $29.77.

Copper hit $7,115.75, its lowest since August 2010. It was its sharpest weekly decline in nearly three years for the economically sensitive red metal.

U.S. crude fell 66 cents to settle at $79.85 a barrel. London Brent crude fell $1.52 to settle at $103.97.

The euro rose 0.4 percent to $1.3515, rebounding from an eight-month low. The dollar rose 0.5 percent to 76.66 yen and was on track for its best month since May 2010 against a basket of currencies.

U.S. Treasuries prices slipped after a huge rally this week.

Benchmark U.S. 10-year notes were down 1-2/32 in price, with yields rising to 1.84 percent. Prices of 30-year bonds were down 2-1/32, yielding 2.90 percent.

(Additional reporting by Ryan Vlastelica, Steven C. Johnson and Barani Krishnan in New York and Harpreet Bhal in London; Editing by Andrew Hay)

Finance chiefs from around the world have turned up the heat on Europe to do more to prevent Greece's debt woes from infecting other euro zone countries and the world economy.

Concern now appeared to be turning toward safeguarding the banking system more than rescuing Greece, as international lenders were increasingly losing patience with Athens consistently missing fiscal and reform targets.

British finance minister George Osborne said the euro zone needed to gain control of the situation by the time leaders of the Group of 20 economies meet in France in November.

"They have six weeks to resolve this crisis," he said on the sidelines of semiannual policy discussions in Washington.

World stock markets, which had plunged to a 14-month low on fears about the scale of the crisis, steadied after European Central Bank officials said they would use more firepower to help the banking system withstand financial strains.

Pressure is growing on European governments for a recapitalization of the region's banks to strengthen them in the event of a Greek default.

At the same time, European policy-makers seemed to be warming to the idea of giving more muscle to their bailout fund, which would be sorely tested if Athens defaulted.

Greek Finance Minister Evangelos Venizelos was quoted by two newspapers as saying an orderly default with a 50 percent haircut for bondholders was one way to resolve the heavily indebted euro zone nation's cash crunch.

Greece is in tense talks with the International Monetary Fund and European authorities, known as the troika, to secure a new 8 billion-euro installment of its rescue package to avoid bankruptcy in October.

In return for aid, Athens pledged austerity measures, but negotiators have expressed frustration at what they say is Greece's slow reform pace. The nation's finance minister is due to meet the head of the IMF on Sunday.

"The troika officials said they were going over again measures they had agreed to months before. They said they had a sense of deja vu," a source close to the talks said on condition of anonymity.

October's loan payment, however, is still widely expected to be made. The next installment is due in December.

ECB President Jean-Claude Trichet urged authorities to take decisive action, saying risks to the financial system had "increased considerably."

Lawrence Summers, a former U.S. treasury secretary, gave a somber assessment of the dangers facing the world economy, including a U.S. recovery that has neared a standstill.

"This is the 20th annual meeting (of the IMF and World Bank) I've been privileged to attend. There has not been a prior meeting at which matters have had more gravity and at which I have been more concerned about the future of the global economy," Summers told a discussion panel.

PUZZLE PIECES

As European policymakers looked to piece together a bolder crisis-fighting strategy, investors took some relief as three officials said the ECB could revive its one-year liquidity lines to shore up banks.

"I think it might be advisable to think about reintroducing this approach," ECB governing council member Ewald Nowotny said.

The IMF, which has been pressing aggressively for a recapitalization of Europe's banks, reckons the debt crisis has increased their risk exposure by 300 billion euros.

In a sign Europe was coming to terms with the idea of a recapitalization, France's top market regulator said 15 to 20 banks needed extra capital.

The growing talk of a Greek default met with stiff opposition from German Chancellor Angela Merkel. She told a meeting of her political party members that default was not an option because it might trigger a domino effect with other struggling economies. "The damage would be impossible to predict," Merkel warned.

Politicians in northern Europe, especially in Germany, have opposed dedicating more money to fight a crisis that they see as caused by the profligacy of other euro zone members. Now, leaders will have to navigate the tricky politics.

"It's not a question of ability for the euro zone," Bank of Canada Governor Mark Carney. "It is a question of political will."

ECB governing council member Klaas Knot told a Dutch daily a Greek default could no longer be ruled out, a warning echoed by the IMF's top official in Europe, Antonio Borges.

"If the Greeks do what they have to do there will be no default," Borges said. "But on the other hand if they hesitate, procrastinate, find it impossible ... then it is very hard to avoid."

G20 finance ministers and central bankers had pledged on Thursday to "take all necessary actions to preserve the stability of the banking system and financial markets as required," a statement that failed to placate investors.

The G20 communique said the 17-nation euro zone would implement actions to "maximize" the impact of the region's bailout fund by mid-October.

G20 participants did not say how the 440 billion-euro European Financial Stability Facility might be altered although French Finance Minister Francois Baroin used the word "leverage" in comments to reporters.

The United States has called on Europe to leverage up the EFSF to give it more firepower.

(Additional reporting by IMF reporting team in Washington, Sakari Suoninen in Frankfurt, Natsuko Waki and Ana Nicolai da Costa in London, Lefteris Papadimas and Ingrid Melander in Athens; Writing by William Schomberg, Glenn Somerville and Paul Taylor; Editing by Chizu Nomiyama and Neil Stempleman)

Greek Finance Minister Evangelos Venizelos was quoted by two newspapers as saying an orderly default with a 50 percent haircut for bondholders was one of three possible scenarios for resolving the heavily indebted euro zone nation's fiscal woes.

Officials played down the reports and Venizelos described them in a statement as an unhelpful distraction from the central task of sticking to Greece's EU/IMF bailout program.

European Central Bank governing council member Klaas Knot told a Dutch daily a Greek default could no longer be ruled out, the first ECB policymaker to speak openly of the prospect.

"It is one of the scenarios," Dutch daily Het Financieele Dagblad quoted him as saying.

"All efforts are aimed at preventing this, but I am now less certain in excluding a bankruptcy than I was a few months ago," Knot said, adding that he wondered "whether the Greeks realize how serious the situation is."

More signs emerged on Friday that European governments are working on recapitalizing vulnerable banks, with France's top market regulator saying 15 to 20 banks needed extra capital, although no French ones "at this stage.

The International Monetary Fund reckons Europe's banks could need to recapitalize to the tune of 200 billion euros and many bank analysts are far gloomier than the Fund.

The European Commission said European banks had already received 420 billion euros in funds since 2008 and were in much better shape than three years ago.

"The recapitalization of European banks is something that is ongoing, it is something that is already happening," Commission spokesman Olivier Bailly told a regular briefing.

European shares fell again, leaving them on course for a fifth straight month of losses, after a commitment from G20 finance ministers and central bankers to "take all necessary actions to preserve the stability of the banking system and financial markets as required" failed to placate investors.

A statement issued after G20 talks in Washington said the 17-nation euro zone would implement "actions to increase the flexibility of the EFSF and to maximize its impact" by mid-October.

But it left unclear whether they would go beyond an already agreed widening of the euro zone bailout fund's powers, which has so far failed to reassure.

Newspaper Ta Nea said Venizelos had told Socialist lawmakers behind closed doors that the government's central scenario was to stick to austerity plans to receive a second 109 billion ($146 billion) bailout and avoid bankruptcy.

The alternatives were either an agreed restructuring of Greek debt with a 50 percent reduction in the face value of government bonds, or a disorderly default, he said.

Greek bank shares fell by nine percent on the reports, prompting Venizelos to say in a statement: "All other discussions, rumors, comments, scenarios which are diverting our attention from this central target and Greece's political obligation ... do not help our common European task."

Deutsche Bank said European banks may face a bigger-than-expected hit from an internationally agreed swap arrangement on Greek government debt, which has still to be sealed.

Private sector creditors agreed in July to take a 21 percent loss on Greek bonds maturing before 2020, but the loss is more likely to be 25 percent or more, said Charlotte Jones, in charge of group controlling at Germany's biggest lender.

The European Union's top economic official, Olli Rehn, said in a speech in Washington that the EU was doing everything to avoid an uncontrolled default. He did not explicitly rule out an orderly restructuring of Greek debt, which many economists see as inevitable.

Venizelos was flying to Washington for weekend meetings of the International Monetary Fund and World Bank and is expected to discuss Greece's position with fellow finance ministers on the sidelines.

The government approved a raft of more draconian austerity measures this week, including putting 30,000 public employees on a path to redundancy, cutting pensions and raising taxes, in an effort to secure the next 8 billion euro loan installment vital to avoid running out of money in mid-October.

LEVERAGE?

Shares of several European banks have plunged and funding costs have risen as investors worried about exposure to debt issued by Greece and other debt-heavy European countries.

G20 participants did not say how the 440 billion euro EFSF might be altered although French Finance Minister Francois Baroin used the word "leverage" in comments to reporters.

The United States has previously proposed that Europe could leverage up the European Financial Stability Facility, giving it more firepower to protect the euro zone and its banks. German politicians and central bankers say that would be illegal.

A U.S. official, speaking after the G20 meeting, said the group showed a heightened sense of urgency but did not discuss a specific mechanism to leverage or expand the bailout fund.

Politicians in northern Europe, especially in Germany, have opposed dedicating more money to offset what they see as the profligacy of countries such as Greece. Those tensions have also flared within the European Central Bank over its role in buying bonds of struggling euro zone states.

However, Europe has come under heavy pressure from the United States and other countries to take bolder steps.

Earlier on Thursday, U.S. Treasury Secretary Timothy Geithner voiced optimism that Europe would devote more of its own resources to backstop euro area governments and banks.

"I am very confident they're going to move in the direction of expanding (their) effective financial capacity," he said. "They're just trying to figure out how to get there in a way that is politically attractive."

The leaders of seven big economies stressed the need to contain the debt crisis, and finance officials from the so-called BRICS countries, including heavyweights China, Brazil and India, said they would consider giving more funds to the IMF to boost global stability.

But India said developing countries were not in a good position to bail out richer economies and the U.S. official said the G20 had not talked about emerging economies providing the IMF with more funds.

(Additional reporting by Sakari Suoninen in Frankfurt, Daniel Flynn in Washington, Natsuko Waki and Ana Nicolai da Costa in London, Lefteris Papadimas and Ingrid Melander in Athens,; Writing by Paul Taylor, editing by Mike Peacock)