Stocks drop for a 3rd day as earnings slide

NEW YORK -- A parade of grim news, from weak corporate earnings to a pullback at U.S. factories to spreading fault lines in Europe's debt crisis, sent investors fleeing stocks for a third straight day Tuesday.

As if that weren't bad enough, Apple delivered a rare earnings disappointment after the closing bell, boding poorly for today's trading.

The Dow Jones industrial average fell 104.14 points, or 0.8 percent, to 12,617.32. It was the third triple-digit point loss in a row for the blue chip index. The last time that happened was September, when fears were rife that the U.S. was on the brink of another recession.

Lower earnings forecasts from corporate bellwethers like United Parcel Service, combined with a weak report on manufacturing, fed fears of more disappointing results from Corporate America in the coming days.

"Our guess is we haven't seen the worst," said Carl Yingst, chief market analyst at Joseph Gunner, an investment bank.

Soon after he spoke came a bit of confirmation from a stock market star. After the close of trading, Apple reported the smallest increases in revenue and income in years, badly missing analysts' expectations. The stock fell $29.76, or 5 percent, to $571.19 in extended trading.

"It's a huge swing and a miss for a company that usually knocks the cover off the ball," said Jack Ablin, chief investment officer of Harris Private Bank. "The ill winds of global trade are enveloping everyone, even the high and mighty."

It was a fitting end to a bad day as investors around the world dumped stocks and fled to the relative safety of U.S. government debt. The yield on the benchmark 10-year Treasury note fell to another record low and the dollar hit a two-year high against the euro.

Stocks fell from the start of trading following news that UPS had cut its earnings forecast 4 percent for all of 2012 as global trade slows. UPS's stock fell $3.61, or 5 percent, to $74.34.

Also weighing on stocks, Spain's borrowing costs spiked as investors worried that country could become the latest in Europe to ask for a financial lifeline. Spain's banks have already received help from international lenders.

The broader Standard & Poor's 500 fell 12.21 points to 1,338.31. The Nasdaq composite was off 27.16 points to 2,862.99.

Early in the day, DuPont reported that its net income fell 3 percent for the second quarter on slower business in Europe and Asia. The huge chemical maker also reported revenue that fell short of Wall Street's expectations. DuPont's stock lost 97 cents, or 2 percent, to $47.74.

Adding to the jitters was a report from Federal Reserve Bank of Richmond indicated that manufacturing in the central-Atlantic region is contracting. That followed reports of pullbacks in New York and Philadelphia.

In Europe, the yield on the 10-year Spanish government bond rose 0.10 percentage point to 7.53 percent, a dangerously high level. Investors also sold Italian government bonds, sending the yield on that country's 10-year bond up 0.32 percentage points to 6.54 percent.

Late Monday, Moody's Investors Service issued a warning about the credit rating for Germany. Moody's anticipates that strong countries like Germany will have to shoulder a heavy financial burden as they support weaker countries like Spain and Italy. The debts of those countries are considered far too big for current bailout funds to handle.

In cutting its outlook on Germany, Moody's also said there was an "increased likelihood" that Greece would leave Europe's monetary union.

"Things are only going to get worse," said Adrian Day, president of Adrian Day Investment Management. He added that he's not buying stocks, save for gold-related companies, because he expects them head lower as the European crisis deepens.

As they dump stocks, investors have been piling into U.S. government bonds. On Tuesday, the yield on the 10-year Treasury note fell to 1.40 percent, matching the record low it reached Monday.

Investors have also been selling the euro. The euro fell to $1.20 on Tuesday, a two-year low against the dollar.

In corporate news, AT&T and Whirlpool both fell short of analyst estimates of earnings and revenue. AT&T fell 75 cents, or 2 percent, to $34.63. Whirlpool, the world's biggest appliance maker, dropped $5.06, or 7.5 percent, to $62.25.

So far this earnings season, nearly seven of ten companies that have reported earnings have beaten estimates, slightly higher than is usual, according to S&P Capital IQ, a research firm. But analysts had been lowering those expectations for months so the feat of surpassing them isn't so impressive.

Some other companies in the news:

* Cisco Systems fell the most of the 30 stocks in the Dow, or 6 percent, after the network equipment maker announced its latest round of staff cuts. Cisco dropped 95 cents to $15.12.

* DeVry plunged $6.76, or 25 percent, to $20.80, the biggest drop in the S&P 500 index. The for-profit education company said enrollment is falling, forcing it to cut 570 jobs. The company also projected that its profit for the latest quarter will come in well short of analyst estimates.