Apple Falls From The Tree, Spooks Markets

Major markets get spooked by Apple’s earnings miss.

Apple (NASDAQ:AAPL) missed its earnings and sales estimates today which spooked general indexes as the world’s largest company seems to have been impacted by the spreading global economic slowdown. Apple dropped 4.3% on the day which took the S&P 500 into negative territory at the close.

UPS, (NYSE:UPS) another bellwether company in the transportation sector, is down more than 7% in the last four trading days, as the company missed estimates due to slowing global commerce and so trimmed its earnings outlook.

In economic reports, US home sales also dropped sharply which added to overall nervousness while investors hoped for more central bank intervention to offset the gathering gloom.

U.S. home sells plunged 8.4% and came in at the weakest levels for the year while, in Europe, recession dug deeper into the United Kingdom as the Summer Olympics get under way.

Boeing raised its forecast, as did Caterpillar, which boosted the Dow to a small gain, while the other major indexes posted small declines.

In Asia, the Nikkei dropped 1.4% while the Topix fell 1.6%, but in Europe, indexes were mostly flat with the Stoxx 50 gaining 0.35%, the FTSE 100 slipping 0.02% and the Dax adding 0.25%.

Investors are trying to remain optimistic that the Federal Reserve will once again launch another round of quantitative easing to offset slowing economic conditions. Wall Street Journal reporter, John Hilsenrath, reported today that the Fed was exploring possible action as soon as their meeting next week at the end of July.

Chairman Bernanke has outlined various potential steps which include buying more bonds and an even longer period of record low interest rates. As unemployment remains high and U.S. economic growth slows, the pressure mounts on the Fed to do something, but doubts have also grown over what kind of real impact any additional Fed action might have on real economic growth in the United States. The last Fed move was in June with the extension of “Operation Twist” and so clearly things aren’t going well if they’re considering additional steps just a month later.

So far the Fed has bought over $2 trillion in various types of securities.

For the day, the Dow Jones Industrial Average (NYSEARCA:DIA) advanced 0.5%, the Nasdaq 100 (NYSEARCA:QQQ) fell 0.7% and the S&P 500 slid 0.03%. The S&P 500 (NYSEARCA:SPY) has been challenging its widely watched 50 day moving average in recent days but managed to close just above it again today. The Russell 2000 index of small cap stocks (NYSEARCA:IWM) posted an advance of +0.2%.

Apple (Nasdaq:AAPL) was the big drag on major indexes with its decline of 4.3%.

After hours, more bad news came from the tech sector (NYSEARCA:QQQ) with Zynga (NASDAQ:ZNGA) dropping more than 30% and the company joined Netflix in the losers column for the day as Netflix (NASDAQ:NFLX) dropped 25% during the regular session.

Bottom line: Many analysts say that “as Apple goes, so goes the market,” and if that is true, today’s report casts a cloud over the U.S. stock market going forward. Apple (NYSEARCA:AAPL) rarely misses earnings estimates and the stock is down sharply from its yearly high and today fell below its 50 day moving average. We’ll see if Apple’s fall from the tree takes the rest of the market with it as summer’s heat wears on.

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