AFTER two weeks of earnings-season vacation, US traders return to their regular occupation of worrying about the euro this week.

The Dow Jones Industrial Average gave back a chunk of its recent gains and Treasury yields fell to near historic lows on Friday as Spain's budget crisis intensified.

Stocks had risen earlier in the week as quarterly earnings from multinationals and banks were not as bad as feared. But even as they reported growth, some key companies such as GE warned that the growth may not persist amid "volatile" economic conditions.

Indications that corporate profit growth is slowing, China's apparent weakness - and above all - the threat of Spanish bankruptcy, have led one money manager to conclude that the period of global economic growth and the bull market in stocks that began in 2009 are coming to an end.

A correction more severe than those experienced in 2010 and 2011 may be at hand, said Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund, who was among the first to grasp the extent of the 2008 financial crisis.

The yield on Spanish debt hit a new euro-era high on Friday, and is now above the 7 per cent level viewed as unsustainable for smaller euro nations.

While the bailout money from the European Stability Mechanism may soon be available to buy Spanish bonds, the size of the hole in the nation's finances is too big for this planned fund to fill, Mr Di Mattia said. European regulators must go back to the drawing board yet again.

Any attempt to save Spain will likely drag the euro even lower than its current US$1.21 level against the dollar, Mr Di Mattia predicted. This sudden devaluation will further hurt European consumption.

Economists expect Friday's second-quarter US gross domestic product growth to come in at 1.2 per cent, worryingly close to recessionary pace. Other analysts argue that the US economy, at least, can still skirt recession:

"Just as the (technology) sector carried us out of the doldrums of 2008-2009, we are seeing the potential for a similar thing this year," said Joe Kinahan, chief derivatives strategist at TD Ameritrade, who pointed to surprisingly resilient reports from International Business Machines, Google, eBay and Microsoft last week. "This is a sector that is sending a much different message than we are seeing from the rest of the economy," he said.

On Tuesday, Apple may keep this streak alive by yet again topping Wall Street targets but Facebook could remind investors how difficult it is to make money on the Internet when it reports earnings on Thursday.

In the absence of major economic data from China, Caterpillar's earnings report may provide a window on whether the slowdown will continue there this year, said Quincy Krosby, investment strategist at Prudential Financial. The maker of construction machinery has had its best years in recent times when China's infrastructure spending is running high.

Oliver Pursche, president of money manager Gary Goldberg Financial Services, said Finland's agreement to the Spanish bank bailout may ease some of the pressure on the southern European nation because the Finns had initially opposed assisting. If the spirit of compromise between Spain and Finland is applied elsewhere, the euro may yet be saved, he said.

Mr Di Mattia acknowledges that the European response to the current crisis is a "binary event". An intervention could goose stocks again as it has in the past.

"The only reason (stocks could rally) is if the ECB really changes its stance and prints a lot of money, but I don't see that happening," Mr Di Mattia said.

Bullish traders may be hoping for hints of another round of quantitative easing from the Federal Reserve, but bond purchases would be less effective stimulus now that rates are already so low, Mr Di Mattia said.

Some investors will see rays of sunshine even as the outlook darkens. Energy stocks will likely continue to rise as long as threats of disrupting global oil markets keep coming from Iran. And the agricultural end of the commodities sector is also likely to rise further as corn and wheat prices react to one of the worst droughts in the US Midwest in recent memory.

Last week, the National Oceanic and Atmospheric Administration predicted that the US heat wave will carry through into August.