* U.S. stocks fall sharply as earnings disappoint
* Dollar falls as U.S. durable goods data weaker than expected
* Cost of insuring Russian debt rises after rating cut (Updates prices, adds European stocks close, adds details)
By Caroline Valetkevitch
NEW YORK, Jan 27 (Reuters) - Global stock indexes fell on Tuesday following disappointing U.S. corporate earnings results and an unexpected decline in U.S. durable goods orders, while the dollar also retreated.
All three major U.S. stock indexes were down more than 1 percent in midday trading.
Shares of Microsoft, down 9.1 percent, and Caterpillar, down nearly 8 percent, were among the biggest drags on U.S. stocks. Microsoft's results showed the main engine of its historic earnings power, selling Windows and Office software to big businesses, is waning. Caterpillar's quarterly profit came in below analysts' expectations and the company warned that lower oil prices will hurt 2015 results.
The dollar fell following release of the durable goods data and on speculation the Federal Reserve might hold off on raising interest rates longer than currently expected. The U.S. central bank is due to release a policy statement on Wednesday.
"U.S. equities could come under pressure as investors ratchet down their growth estimates for the U.S. economy," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
"There was just too much hype about the U.S. economy having risen into a new and higher growth channel. We're still stumbling along."
U.S. Commerce Department data showed non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, unexpectedly fell last month. A separate report, however, showed U.S. consumer confidence rose to its highest since 2007 in January.
On Wall Street, the Dow Jones industrial average fell 345.05 points, or 1.95 percent, to 17,333.65, the S&P 500 lost 28.86 points, or 1.4 percent, to 2,028.23 and the Nasdaq Composite dropped 84.08 points, or 1.76 percent, to 4,687.69.
A snowstorm in the U.S. Northeast kept many investment banks and fund managers on skeleton staff, though the main exchanges were open.
MSCI's global share index was down 0.4 percent while an index of European shares closed down 0.8 percent.
The euro rose 1 percent to $1.1345, off the session high $1.14230. That pulls it further away from Monday's 11-year low of $1.1098 hit after voters in Greece elected an anti-bailout government.
Investors widely expect the Fed to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening monetary policy. However its timetable remains for higher rates by mid-year, a trajectory that presages further broad-based gains for the dollar.
The cost of insuring exposure to Russia's debt rose after Standard & Poor's cut Russia's sovereign credit rating to "junk" late on Monday, citing weakened economic growth prospects and Western sanctions over Ukraine.
U.S. Treasury debt prices rose, with 30-year yields touching record lows after the U.S. economic data. Thirty-year bonds were last up 1-7/32 in price to yield 2.3356 percent. Earlier the yield hit a record low of 2.328 percent.
In commodity markets, oil rose as a weaker dollar propped up commodities priced in the currency. Brent was up $1.05 at $49.21 barrel, while U.S. crude rose $1.06 to $46.21. (Additional reporting by Rodrigo Campos in New York; and Lionel Laurent, John Geddie, Francesco Canepa, Jemima Kelly and Karin Strohecker; Editing by Janet Lawrence, Dan Grebler and James Dalgleish)