MarketView for July 24

Summary

The major equity indexes were lower at the closing bell again on Tuesday, hit by signs the euro zone crisis is worsening and evidence that Europe's slowdown is hurting U.S. 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.

Share prices did rally a bit 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 Chairman 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 percent to $572.12 in extended-hours trading.

During the regular session, United Parcel Service, seen as a proxy for economic activity, fell 4.6 percent 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 .DJT down 1.2 percent.

The struggles of the U.S. and euro zone 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 euro zone's small economies has since become entrenched in Germany and France. At the same time there were growing concerns 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 percent to $34.63 after the company reduced its outlook for business services this year. Whirlpool fell 7.5 percent to close at $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 Fed says it is still considering a third bout of quantitative easing, or QE3, and some analysts expect recent weakness in the U.S. economy could prompt policymakers to launch such a program as early as September.

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

Cisco fell 5.9 percent 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 percent 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 percent.

About 6.71 billion shares changed hands on the three major equity exchanges, compared with the year-to-date daily average of 6.74 billion shares.

Apple Misses Street Expectations

As you read the following please keep in mind that Apple simply did not do what the Street expected. Yet, Apple’s performance would be the envy of most every other company. Nonetheless, Apple's results fell short of Street's expectations as consumers held off on buying its flagship iPhone ahead of a new version expected in the fall.

Shares of the world's most valuable technology company shed more than 5 percent of their value after Apple - which as a rule always manages to exceed expectations with a degree of regularity - reported its second quarterly miss on results in less than a year. Apple’s shares fell to $570.81 in late trading after closing at $600.92.

The disappointing numbers highlight how the Apple brand is becoming less resistant to the economic and product cycles that have plagued rivals. Apple divided the blame for the shortfall between muted consumer purchases in Western European countries and the pullback in demand as consumers wait for a new iPhone model that many expect will be launched in September or October.

From April to June, Apple shipped 26 million iPhones, well below the 28 million to 29 million that Wall Street analysts had predicted, even taking into account a pause in buying ahead of the iPhone 5. It was a far cry from the 35.1 million that moved in the March quarter. At the same time, sales of the iPad, which accounts for well over half the world's market, came in at 17 million in the fiscal third quarter, above expectations.

Apple, notorious for its conservative forecasts, estimated earnings for the September quarter of $7.65 a share on revenue of $34 billion, well below the Street estimate of $10.23 a share on revenue of $38.03 billion, according to Thomson Reuters I/B/E/S.

The Silicon Valley giant has a lot riding on its next iPhone, the product that yields more than half its revenue and helps shore up overall margins.

Apple has seen Samsung Electronics - now the world's largest seller of smartphones - and other handset manufacturers using Google's Android software chip away at its market share.

Executives acknowledged buyers were refraining from purchases because of "rumors and speculation" around the iPhone 5, which sources have said will come with a thinner and larger screen. They laid part of the blame on sputtering demand from European economies like Germany and France, while dismissing the impact of a Chinese slowdown.

Revenue in the Asia Pacific region - which includes China but not Japan - shrank 22 percent from the previous quarter, far outstripping the 3 percent to 6 percent fall in revenue in the Americas and Europe.

"The economy in Europe is not doing well. We think this impacted our results," CFO Peter Oppenheimer said.

The expected roll out of a new Phone will likely pose a stiff challenge to rivals.

Apple's fiscal third-quarter revenue rose to $35 billion, much lower than the average analyst estimate of $37.22 billion. It reported net income of $8.8 billion or $9.32 a share, compared to $7.3 billion or $7.79 a share a year earlier. Gross margin for the quarter was 42.8 percent, also lower than the expected 43.68 percent. Apple's hoard of cash and other securities now amounted to $117.2 billion.