Stock Futures Down on Tech Weakness

NEW YORK ( TheStreet) -- Stock futures were sliding deeper into negative territory Wednesday as shares of tech majors Intel ( INTC) and IBM ( IBM) slumped following mixed earnings reports.

Futures for the Dow Jones Industrial Average were down 42 points, or 73.5 points below fair value, at 12,982. Futures for the S&P 500 were down 4.9 points, or 7.8 points below fair value, at 1379. Futures for the Nasdaq was falling 5.5 points, or 12.2 points below fair value, at 2707.

Stocks enjoyed a broad rally on Tuesday as a strong global growth forecast from the International Monetary Fund, a pair of successful Spanish bond auctions and strong corporate results boosted investor sentiment.

In Asia, Japan's Nikkei Average finished 2.1% higher following the strength in other markets. Hong Kong's Hang Seng index rebounded 1.1%, also following gains in the other markets as well as mainland China bourses, which advanced as the property sector rallied on expectations that falling home prices would lead to stronger sales and open the door to policing easing.

In corporate earnings news, Intel cruised past Wall Street's expectations for its first-quarter results but the stock was down in pre-market trading, off 2.6% to $27.73, as the Dow component forecast a sequential decline in gross margins in the second quarter.

"Earnings will be about not just who is beating, but what else is being said," says Mike Boyle, senior vice president of Advisors Asset Management.

Santa Clara, Calif.-based Intel reported non-GAAP earnings of $2.9 billion, or 56 cents a share, on revenue of $12.9 billion for the first quarter, besting the average estimate of analysts polled by Thomson Reuters for a profit of 50 cents a share in the March-ended quarter on revenue of $12.84 billion.

For the second quarter ending in June, Intel said it expects revenue of $13.6 billion, plus or minus $500 million, which compares to the current Wall Street consensus view for revenue of $13.45 billion. Gross margin for the second quarter is pegged between 62% to 63% on a non-GAAP basis, a decline from a non-GAAP gross margin of 65.1% in the first quarter.

IBM shares also fell in pre-market trading, down 2.2% at $203, after Big Blue missed Wall Street's first-quarter revenue forecast. IBM brought in revenue of $24.67 billion and earnings of $2.78 a share, compared with $24.6 billion and $2.41 in the same period last year. Analysts surveyed by Thomson Reuters expected IBM to report revenue of $24.77 billion and earnings of $2.65 a share.

One bright spot for tech was Yahoo! ( YHOO), which was rising 1.5% to $15.24 in pre-market trading after posted better-than-expected first quarter results. Yahoo! earned 23 cents a share on revenue of $1.08 billion. Analysts were expecting profit of 17 cents a share on revenue of $1.06 billion. The Internet company also gave stronger-than-expected second-quarter revenue guidance.

On the Yahoo! conference call Tuesday, CEO Scott Thompson announced the company is cutting 50 properties, but didn't say which properties were being unloaded. Thompson was also asked about the sale of its Asian assets and noted that Yahoo! is "continuing to pursue active discussions with Alibaba."

"If you look historically, about 70% of S&P companies on average beat," says Boyle. "Usually the market underestimates a little. We try to look at how many are growing earnings, growing revenue and what happens going into earnings season. If the market is on a tear going into earnings season, usually there's a selloff because nothing will be good enough. Though on a tear since October, we did have a mini correction of about 4% in the first week of April. With that type of correction, people usually weigh the market based on what is coming in versus what they thought was coming in."

eBay ( EBAY), the online auctioneer, is expected by analysts Wednesday to report first-quarter earnings of 52 cents a share on revenue of $3.15 billion after the closing bell. Think Equity is bullish on eBay, and it is expecting both PayPal and the company's Marketplaces businesses to do well.

"We believe eBay will report 1Q12 results that are above our projections on revenue and in line on pro forma earnings per share," said the firm in a preview of eBay's results. "Intra-quarter channel checks across Marketplaces have come back largely positive and we believe the extra shopping day in February and mix-shift to fixed price should help overall growth."

Qualcomm ( QCOM), the wireless chipmaker, is expected to post fiscal second-quarter earnings of 96 cents a share on revenue of $4.84 billion after the close.

Blue chipper American Express ( AXP) is slated to report its quarterly results after the markets close today.

London's FTSE was down 0.3% and Germany's DAX was sliding 1.1%.

In U.S. economic news, the Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, increased 6.9% in the week ended Apr. 13.

May oil futures were down 55 cents at $103.65 a barrel, while June gold futures were falling $10.90 at $1,640.20 an ounce.

The benchmark 10-year Treasury was up 5/32, diluting the yield to 1.99%, while the U.S. dollar index was up 0.4%.

-- Written by Andrea Tse in New York.

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