Stocks drop on Apple's earnings miss, economic fears

Updated: 6 p.m. ET

Stocks fell back today as Apple (AAPL) shares dropped after an earnings miss and worries expanded on Europe's debt-and-banking crisis.

At the same time, the Federal Reserve's Beige Book report showed the economy is growing -- but only slightly at best.

Apple was off 5.6% to $398.62 after earnings for its fiscal fourth quarter missed Street estimates late Tuesday. Much of the shortfall appeared to be related to slower iPhone sales. Company officials said during Tuesday's conference call the fall-off was probably due to buyers waiting for a new iPhone model to hit the market.

Apple's woes were the biggest cause for a 48-point decline in the Nasdaq-100 Index ($NDX) to 2,317 and more than offset share-price gains for Intel (INTC) and Yahoo (YHOO). Both reported better-than-expected​ third-quarter results on Tuesday.

The Dow Jones industrials ($INDU) closed down 72 points, or 0.6%, to 11,505; the blue chips had been up 57 points at 1 p.m. ET. The Standard & Poor's 500 Index ($INX) was down 16 points, or 1.3%, to 1,210. The Nasdaq Composite Index ($COMPX) was off 53 points, or 2%, to 2,604.

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The European concerns picked up after The Wall Street Journal reported that lawyers watching the talk about expanding a bailout fund to contain the problem say there are big legal impediments in the way of the idea. The biggest issue: The plan would violate the eurozone's no-bailout pledge.

The Journal's report came after stocks in Germany, France and Britain were largely higher.

There was a second report that the German Bundestag wants to approve any bailout plan.

Leaders of the eurozone nations will meet Sunday in Brussels, Belgium, to discuss the crisis. Traders and investors are hoping that a concrete agreement on a plan to resolve the crisis will be the result.

The Beige Book, the Fed's narrative look at the economy, not only cited slight or modest growth, but it also said many business contacts offered weak or uncertain business outlooks.

There was some strength in consumer spending; auto sales were a bright spot in the report. But real estate was weak, and the report cited little gains in hiring or wages.

A day ahead on Thursday
Thursday brings a very large list of key earnings reports from companies that include AT&T (T), Capital One Financial (COF), Eli Lilly (LLY), Union Pacific (UNP), Southwest Airlines (LUV) and Microsoft (MSFT), the publisher of MSN Money.

In addition, the Labor Department will report on weekly jobless claims. The National Association of Realtors will release its report on existing-home sales in September, and the Philadelphia Federal Reserve Bank will release its October manufacturing report.

Futures trading suggests a modestly higher open.

Earnings from American Express, Wynn and eBay don't impress
After the close, shares of American Express (AXP) were down slightly to $45.80 after earnings of $1.03 a share, up from 90 cents a year ago, beat the consensus estimate of 96 cents. Revenue rose 9% to $7.57 billion. Loan-loss provisions fell from $373 million a year ago to $249 million.

Wynn Resorts (WYNN) shares were down 5% to $123.80 as earnings of $1.05 after one-time charges missed the Street estimates of $1.18 a share. The profit was actually up 169% from a year ago. Revenue was up 33.3% to $1.02 billion, driven primarily by a 47% revenue gain from its operations in Macau. Las Vegas revenue was up 3.7% to $346.9 million.

Shares had fallen 5.4% to $130.27 in regular trading.

Meanwhile, eBay (EBAY) shares were down 3.8% to $31.92 after falling 2% to $33.18 in regular trading. Third-quarter earnings and revenue beat Street estimates, but its guidance -- 58 cents a share in earnings and revenue of $3.2 billion to $3.35 billion -- was less than expected.

Commodities fall back
Crude oil (-CL) in New York was off $2.10 to $86.24 a barrel. Brent crude was down $2.53 to $108.62 a barrel. While Brent is currently how gasoline is priced, it was lower because of worries about how economies in Europe will fare in the coming months.

Energy shares were mixed. Exxon Mobil (XOM) was off 0.6% to $78.43, while Chevron (CVX) was up 0.7% to $102.24. Halliburton (HAL) was off 4% to $33.88, while Schlumberger (SLB) dropped 2.9% to $67.90.

Gold (-GC) settled down $5.80 to $1,647 an ounce in New York. Silver (-SI) was down 55.4 cents to $31.277 an ounce. Copper (-HG) was down 10.2 cents to $3.258 a pound.

Metals stocks were mostly lower. Gold producer Newmont Mining (NEM) was down 4.9% to $62.32. Silver producer Coeur d'Alene Mines (CDE) fell 5% to $21.71.

Freeport-McMoran Copper & Gold (FCX) saw a small gain erased after third-quarter results were lower than expected. The shares finished down 2.8% to $34.38. Freeport earned $1.1 billion, or $1.10 a share, down from $1.2 billion, or $1.24 a share, a year ago. Revenue was little changed at $5.2 billion. The company warned that a strike at its giant Grasberg mine in Indonesia would cut output of copper and gold for the year.

Energy prices -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Crude oil (-CL)			$86.11			$88.34			8.72%			-5.77%
(per barrel)
Heating oil (-HO)			$2.9812			$3.0277			7.26%			17.20%
(per gallon)
Natural gas (-NG)			$3.5860			$3.5530			-2.18%			-18.59%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.6715			$2.7469			5.26%			8.90%
(per gallon)
Brent crude			$108.39			$111.15			5.48%			14.40%
(per barrel)
Retail gasoline			$3.4740			$3.4690			0.84%			13.09%
(per gallon; AAA)

Apple weighs on the market
Apple's earnings shortfall was a shock to the market, which has basically bought into the idea the company is infallible.

Much of the shortfall appeared to be related to slower-than-expected​ sales of iPhones. Apple sold 17.1 million iPhones, up 55% from a year ago; analysts had expected sales to hit 20 million units.

Company officials said during Tuesday's conference call -- the first since Steve Jobs' death -- that the fall-off was probably due to buyers waiting for a new iPhone model to hit the markets.

Apple earned $6.62 billion, or $7.05 a share. That's up from profit of $4.31 billion, or $4.64 a share, a year earlier. Analysts were expecting $7.28 a share.

There were also concerns that sales of iPad devices weren't as strong as expected. But CEO Tim Cook said that appeared to be a matter of supply and demand evening out. Apple sold 11.1 million iPads, up from 4.2 million a year ago.

For the record, Apple shares are up 25.6% this year. The S&P 500 is down 2.5%.

Travelers, Morgan Stanley see gains melt away
Travelers Companies (TRV), the big insurance company, was the top performer of the 30 Dow stocks, up 5.7% to $54.39. While earnings fell short of Wall Street’s profit expectations because of Hurricane Irene and Tropical Storm Lee, the severe weather is providing a reason to allow for higher rates.

Meanwhile, investment bank Morgan Stanley (MS) shares, up as much as 6.6% right after the open, closed up a penny to $16.64. The company reported third-quarter earnings of $3.6 billion, or $1.14 a share, helped by an accounting gain of $3.3 billion. Revenue rose 46% to $9.89 billion. The results topped Wall Street's expectations for earnings of 30 cents a share on revenue of $7.42 billion.

Like Morgan Stanley, Citigroup (C) shares shot higher at the open and were up as much as 4.9%, but the shares pulled back, finishing down 1.6% to $29.39.

The company agreed to pay $285 million to settle civil fraud charges that it misled buyers of complex mortgage investments just as the housing market was starting to collapse. The Securities and Exchange Commission said today that Citigroup had bet against the deal in 2007 and made $160 million in fees and profits. Investors lost millions. Citigroup neither admitted nor denied the SEC's allegations.

Shares of Dow component United Technologies (UTX) were down 1.2% to $73.26. The maker of helicopters, jet engines, building elevators and other products reported third-quarter earnings of $1.47 a share, topping expectations by 2 cents. Revenue rose 8.7% to $14.8 billion. The Street had been looking for revenue of $14.55 billion. The company also boosted its full-year earnings outlook to $5.47 a share from a prior range of $5.35 to $5.45 a share.

Shares were lower in part because CFO Greg Hayes suggested 2012 will be a tougher year than 2011.

Energy costs push consumer prices higher
Inflation pressure remained muted in September, the Bureau of Labor Statistics said. The Consumer Price Index rose 0.3% in September, meeting expectations, after growth of 0.4% in August.

The core rate, which excludes food and energy and is considered the most accurate gauge of inflation, inched 0.1% higher after rising 0.2% in August. Wall Street had expected core CPI to tick 0.2% higher.

Multifamily housing starts gain
Housing starts jumped 15% in September, the Commerce Department said. Starts hit an annual rate of 658,000, up from from 572,000.

Building permits slipped by 0.5% to 594,000 from 625,000 in August. Economists had only expected housing starts to rise to 595,000, from August’s previously reported level of 571,000. Building permits were expected to decline to 610,000, from 620,000 previously.

Two quick notes: First, most of the gains for starts came in multifamily housing, which rose 53% to an annualized 227,000 units.  That's a reflection of the reluctance of many buyers to commit to a new home purchase when prices are falling. In fact, single-family starts in September were down 4.9% from a year ago.

Second: While the gain was welcome, starts are still 71% below their January 2006 peak of 2,273.

Short hits from the markets -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0300%			0.020%			50.00%			-75.00%
5-year Treasury note			1.041%			1.037%			7.88%			-48.36%
10-year Treasury note			2.159%			2.151%			12.21%			-34.67%
30-year Treasury bond			3.169%			3.157%			8.49%			-27.35%
Currencies
U.S. Dollar Index			77.416			77.412			-2.10%			-2.36%
British pound			1.5773			1.5708			1.25%			1.07%
(in U.S. $)
U.S. $ in pounds			£0.634			£0.637			-1.23%			-1.06%
Euro in dollars			$1.38			$1.37			3.05%			2.78%
(in U.S. $)
U.S. $ in euros			€ 0.727			€ 0.728			-2.96%			-2.70%
U.S. $ in yen			76.92			76.79			-0.27%			-5.46%
U.S. $ in Chinese			6.40			6.38			0.35%			-3.24%
yuan
Canada dollar			$0.980			$0.986			2.64%			-2.32%
(in U.S. $)
U.S. dollar			$1.021			$1.015			-2.50%			2.38%
(in Canadian $)
Commodities
Gold (-GC)			$1,647.00			$1,652.80			1.52%			15.87%
(per troy ounce)
Copper (-HG)			$3.258			$3.360			3.36%			-26.74%
(per pound)
Silver (-SI)			$31.2770			$31.8310			3.97%			1.10%
(per troy ounce)
Wheat (-ZW)			$6.1950			$6.2525			1.68%			-22.00%
(per bushel)
Corn (-ZC)			$6.3850			$6.44			7.76%			2.57%
(per bushel)
Cotton			$0.9972			1.0018			-0.47%			-31.14%
(per pound)
Coffee			$2.3910			2.3465			4.46%			-0.58%
(per pound)
Crude oil (-CL)			$86.11			$88.34			8.72%			-5.77%
(per barrel)