Stocks Sink on Disappointing Profits

Earnings reports from the likes of AmEx and Texas Instruments and guidance from Apple weigh on investor sentiment.
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Updated from 7:59 a.m. EDT

Stocks in New York entered the tumble cycle at the open Tuesday as a horde of earnings statements from technology and financial firms had Wall Street traders hunkering down for a tough day.

The

Dow Jones Industrial Average

was off 75 points at 11,392, and the

S&P 500

fell 9 points to 1251. The

Nasdaq

was 24 points lower at 2255.

After Monday's close,

Apple

(AAPL) - Get Report

delivered

third-quarter earnings that exceeded expectations, but it guided below the targets for the current quarter, sending shares down more than 10%.

In another technology flop,

Texas Instruments

(TXN) - Get Report

missed on profits and provided a disappointing outlook.

Putting pressure on both financials and the Dow was credit card company

American Express

(AXP) - Get Report

, which fell short of estimates and offered cautious guidance for 2008. Its stock fell 11% after the report.

Fellow Dow member

Merck

(MRK) - Get Report

delivered an earnings beat, but didn't offer forward projections after discouraging test results emerged for the cholesterol drug Vytorin, a joint venture between Merck and

Schering-Plough

(SGP)

.

As the new day dawned, several more companies reported quarterly results. In financial services,

Wachovia

(WB) - Get Report

dropped an $8.9 billion second-quarter loss on shareholders, missing estimates. The bank also said it would be cutting 6,350 jobs, reducing its dividend and abandoning its wholesale mortgage business.

Regional bank

KeyCorp

(KEY) - Get Report

announced a $1.1 billion loss thanks to a $1 billion charge related to a tax court ruling. On the other hand,

Fifth Third

(FITB) - Get Report

also suffered a second-quarter loss, but beat analyst expectations.

Speaking in Washington, D.C., on the state of the financial markets, Treasury Secretary Henry Paulson this morning said that mortgage companies

Fannie Mae

and

Freddie Mac

are a crucial to the effort to recover from credit crunch-related woes. He also said he was confident that Congress would approve his relief plan for the shaky government-sponsored entities.

Earlier, the Office of Federal Housing Enterprise Oversight had said that Fannie and Freddie will have to write down more assets thanks to their exposure to subprime and alt-A mortgages.

Also out were statements from industrial leaders and Dow stocks

Caterpillar

(CAT) - Get Report

and

DuPont

(DD) - Get Report

, both of which exceeded expectations.

Meanwhile, shipping firm

UPS

(UPS) - Get Report

fell short of analyst estimates, and airlines

UAL

(UAUA)

and

US Airways

(LCC)

delivered losses. All three firms have been hampered by rising fuel costs.

On the flip side of the energy boom,

Baker Hughes

(BHI)

trumped forecasts, while fellow energy-patch denizen

Halliburton

(HAL) - Get Report

delivered in-line earnings on record revenue and offered a rosy outlook.

XTO

(XTO)

likewise exceeded expectations.

Wireless telecom

Vodafone

(VOD) - Get Report

was slumping after it met earnings expectations but warned that revenue would be weak because of the slowing economy.

UnitedHealth

(UNH) - Get Report

reported a 73% year-over-year decline in second-quarter income. Excluding charges, however, the company topped analyst estimates.

In commodities, crude oil was losing $1.80 at $129.24 a barrel, and gold was rising $5.70 at $969.40.

Of the broader economy,

Bloomberg

reported this morning that economists at Merrill Lynch reduced their forecasts for U.S. growth. The new figures, described as "adjusting for the new reality," foretell growth of 0.5% in 2009, down from a previous look of 1.5% growth.

Meanwhile, Charles Plosser, president of the Philadelphia Fed, said in a speech this morning that the central bank should reverse its rate-cutting ways, for the moment sparking a reversal in the bond market.

As for Treasuries, the 10-year note was slipping 8/32 to yield 4.07%, and the 30-year was down 15/32, yielding 4.65%. The dollar was rising against the euro and flat vs. the yen.

Overseas, European markets were broadly declining, with London's FTSE and Frankfurt's DAX taking losses. Asia was mixed, with the Nikkei in Japan adding value and the Hang Seng in Hong Kong down fractionally.