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Wall St falls as Europe hits earnings

Jul 25 2012 08:37 Reuters

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New York - Wall Street stocks fell on Tuesday, hit by signs the eurozone crisis is worsening and evidence that Europe's slowdown is hurting US companies, including bellwether UPS.

The decline was the third straight for the S&P 500 index, which tested its 50-day moving average, a technical support level which could trigger more selling if convincingly broken.

Stocks got a lift late in the session after the Wall Street Journal said Federal Reserve officials were moving closer to taking new steps to spur activity and hiring. Fed officials recently have spelled out what measures they might take, including Chairperson Ben Bernanke in a speech last week.

After the market's close, S&P 500 and Nasdaq futures fell on disappointing results from Apple, which reported quarterly revenue below analysts' expectations. Apple's shares fell 4.8% to $572.12 in extended-hours trading.

During the regular session, United Parcel Service, seen by many as a proxy for economic activity, fell 4.6% to $74.34 after reporting quarterly results that missed forecasts and cut its 2012 outlook, citing uncertain global economic conditions. UPS helped pull the Dow Jones Transportation average down 1.2%.

"We are going through an adjustment period where there has been a lot of talk about Europe facing a recession in 2012. Now we are actually seeing it in the earnings and the market is reacting to that," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

The struggles of the US and eurozone economies intensified in July, surveys showed on Tuesday. Europe's private sector looked set for a prolonged slump as the surveys showed the downturn that began in the eurozone's small economies has since become entrenched in Germany and France.

Concerns about the eurozone grew after Spain was forced to pay the second highest yield on short-term debt since the launch of the euro and European Union officials said Greece had little hope of meeting the terms of its bailout.

AT&T lost 2.1% to $34.63 after the company reduced its outlook for business services this year. The S&P telecom index dropped 1.8%.

Whirlpool slumped 7.5% to $62.25 after the world's largest appliance maker missed Wall Street's expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar.

The Dow Jones industrial average was down 104.14 points, at 12,617.32. The Standard & Poor's 500 Index was down 12.21 points, at 1,338.31. The Nasdaq Composite Index was down 27.16 points, at 2,862.99.

The Fed says it is still considering a third bout of quantitative easing, or QE3, and some analysts expect recent weakness in the US economy could prompt policymakers to launch such a programme as early as September.

"Given the events going on around the world, I think the odds are increasing the Fed will take action at one of the next two meetings," said Michael Sheldon, chief market strategist, RDM Financial, Westport, Connecticut.

Of the 145 companies in the S&P 500 that have reported earnings for the quarter, 66.9% have beaten analysts' expectations, Thomson Reuters data showed. Over the past four quarters, 68 percent have beaten estimates.

Cisco Systems fell 5.9% to $15.12 after VMWare said it would acquire privately held Nicira, a move seen as a threat to Cisco's core switching and routing business.

In another sign of the economic malaise from Europe, Texas Instruments warned that its third-quarter revenue would be weaker as customers show caution due to global uncertainties. The shares lost 0.9% to $26.57.

Spanish five-year government bond yields rose above 10-year yields for the first time since June 2001 as investors fretted about the possibility that Madrid may need a full-blown sovereign bailout. The 10-year note last traded at around 7.6%.

Volume was about 6.71 billion shares on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.74 billion shares.

Decliners beat advancers on the NYSE by about 22 to 7. On the Nasdaq, decliners beat advancers about 17 to 7.

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