Wall Street was set to tread water on Tuesday as traders remained focused on high bond yields in Spain and as cautious outlooks from Texas Instruments and United Parcel Service weighed on sentiment.
Texas Instruments Inc's (TXN.O) second-quarter profit beat Wall Street expectations but the company warned that its third-quarter revenue would be weaker than usual as customers are cautious due to global economic uncertainties. The shares fell 1 percent to $26.50.
Concerns about the euro zone focused on Spain's high borrowing costs due to fears the country may seek a bailout, a survey showing Germany's private sector shrank for a third straight month, and Moody's move to cut Germany's rating outlook to negative.
United Parcel Service (UPS.N) reported higher quarterly results that missed forecasts and the world's largest package delivery company cut its 2012 outlook, citing uncertain global economic conditions. The shares fell 4 percent to $74.84.
If we look in the U.S., the earnings that are coming through, the important feature I think is the relatively poor guidance we're seeing from companies as a whole, said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. On top of that people are obviously watching Spain.
European stocks were slightly down in morning trade, adding to the market's two-session slide, as a weaker-than-expected German purchasing managers' survey showed private sector activity in Europe's largest economy contracted for a third month.
S&P 500 futures fell 3.5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 6 points and Nasdaq 100 futures rose 0.25 point.
The market is experiencing a renewed set of fears with concerns over a global economic slowdown and continued worries stemming from the euro zone, said Andre Bakhos, director of market analytics at Lek Securities in New York. Investors are stepping back and taking a risk-off stance for the moment.
Throw in earnings season as another variable and we are back to an erratic environment, he said.
Whirlpool Corp (WHR.N), the world's largest appliance maker, missed Wall Street's expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar. The company's shares fell 4.6 percent to $64.20 in light trade.
Spanish five-year government bond yields rose above 10-year yields for the first time since June 2001 on Tuesday, as investors fretted about the possibility that Madrid may need a full-blown sovereign bailout. The 10-year last traded at around 7.6 percent.
An even gloomier picture for the overall euro zone's private sector, which shrank for a sixth month in July as manufacturing output nosedived, added to the likelihood that the bloc will slump back into recession.
AT&T Inc (T.N) reported a higher-than-expected quarterly profit due to strength in its wireless business, sending its shares up 0.6 percent to $35.58.
Pfizer Inc (PFE.N) said on Monday that its experimental Alzheimer's disease treatment failed to prove effective in one of four high-stakes late-stage trials in patients with mild to moderate forms of the memory-robbing disease. The shares fell 1.7 percent to $23.19.