While you were sleeping: US earnings fall short

BUSINESSDESK: Wall Street dropped as disappointing earnings reports fuelled concern that corporate America is struggling more than anticipated with the slowdown in European and Chinese economies.

Shares of Advanced Micro Devices, a maker of processors for personal computers, shed 11% after posting an unexpected decline in sales.

Shares of Applied Materials, meanwhile, fell more than 2% as the chipmaking-equipment provider lowered its forecasts because of sagging demand oversees.

“Both China and Europe are quite weak,” Applied Materials CEO Mike Splinter said today, Bloomberg News reported. “Both markets are worse than they were at this time last year.”

Adding to the negative tech sentiment was a further drop in the US-listed shares of Research In Motion as the company's new chief executive met with shareholders for the first time, failing to reassure them that there is a light at the end of the tunnel.

In late trading in New York, the Dow Jones Industrial Average dropped 0.67%, the Standard & Poor's 500 Index shed 0.83% while the Nasdaq Composite Index declined 0.95%.

Europe's Stoxx 600 Index, however, ended the day with a 0.8% gain.

Unexpected gains in UK and Italian manufacturing were a welcome change. Separate government reports showed that UK factory output advanced 1.2% in May from the previous month, while Italy's industrial production climbed 0.8% in the same period.

Economists surveyed by Bloomberg News had forecast declines of 0.1% and 0.6% respectively.

Also underpinning sentiment was Monday's agreement by eurozone finance ministers on a bailout of as much as 100 billion euros that should help resuscitate Spain's banking industry.

"This puts us in a position to clean up the Spanish financial system that I think is going to go very deep," Spain's Economy Minister Luis de Guindos said, according to Reuters.

"We must make maximum use of the next 18 months to do this clean up ... and bring down debt levels in the Spanish economy."

Still, uncertainty about what lies ahead for the EU remains. Germany's constitutional court signalled it may take as long as three months to rule on the legality of the EU permanent bailout fund.

Separately, Italy's Prime Minister Mario Monti has said he won't seek another term in office when the current one expires next year. While Mr Monti has followed through on key reforms as sought by EU partners, his personal popularity has plummeted.