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Corporate earnings failed to deliver any cheer to the markets on Tuesday. These dismal results combined with concerns from across the Atlantic dragged the domestic markets lower yet again. Germany suffered a lowering of its rating outlook and reports suggested that Greece will fail to pay off existing debt and needs to undergo debt restructuring. The Dow registered its third-straight decline; the first time since September last year.

The Dow Jones Industrial Average (DJI) suffered a decline of 104.14 points or 0.8% to close at 12,617.32. The Standard & Poor 500 (S&P 500) dropped 0.9% to finish yesterday’s trading session at 1,338.31. The tech-laden Nasdaq Composite Index plunged 0.9% and ended at 2,862.99. The fear-gauge CBOE Volatility Index (VIX) jumped 9.9% and settled at 20.47. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were roughly 6.71 billion shares, just short of the year-to-date daily average of 6.74 billion shares. Decliners far outpaced the advancing stocks on the NYSE; as for 72% stocks that gained, 25% finished in the green.

Coming to cross-Atlantic tensions, Moody's Investors Service noted that lingering European debt troubles are a headwind for the top-rated Euro-zone members and lowered Germany’s rating outlook. In its view, stronger nations like Germany have to bear the burden of embattled nations such as Spain and Italy. According to Moody’s: “The continued deterioration in Spain and Italy’s macroeconomic and funding environment has increased the risk that they will require some kind of external support”. The ratings agency also said that no country is ‘immune’ to the consequences of the debt woes. Moody’s lowered its rating on Germany from ‘Stable’ to ‘negative’.

While Germany’s rating outlook was lowered, hiking possibilities of future ratings downgrades, the ratings agency said Greece faced an "increased likelihood" of exiting the European Union. This, according to Moody’s “would set off a chain of financial sector shocks that policymakers could only contain at a very high cost”.

The economic situation is not promising in Greece either, which was further highlighted by a Reuters report which quoted a European Union (EU) official as saying: "The situation just goes from bad to worse, and with it the debt ratio”. Three EU officials said Greece might not be able to pay what it already owes and needs to restructure its debt. The International Monetary Fund, European Commission, and the European Central Bank, known the troika, have reached Athens and is conducting a debt-sustainability analysis. An official noted: "The debt-sustainability analysis will be pretty terrible", while another official said: "Nothing has been done in Greece for the past three or four months". Thus, European debt fears were pretty evident and investor apprehensions were justified.

Meanwhile, domestic corporate earnings results provided no respite. One of the world's largest appliance makers Whirlpool Corp. (NYSE:WHR) failed to beat the Street’s estimates on both counts and subsequently the company’s shares lost 7.5%. Separately, lower sales volumes across several segments resulted in a year-on-year decline in earnings (including one-time items) for E. I. du Pont de Nemours and Company’s (NYSE:DD). The chemical and industrial products bellwether said macro-economic tensions coupled with other factors compelled it to expect that full-year 2012 adjusted earnings would come in at the lower end of the earlier guidance range of $4.20 to $4.40 per share (excluding special items). Shares of DuPont dropped 2.0%.

Another major concern for the markets was the earnings miss by United Parcel Service, Inc. (NYSE:UPS). Considered to be an indicator for economic activity, not only did United Parcel fail to match both top and bottom-line estimates, but it also reduced its guidance. The European debt crisis and lower Asian volumes were cited as the factors which are taking a toll on the company’s business, leading it to reduce fiscal 2012 adjusted earnings guidance to $4.50–$4.70 from earlier estimates of $4.75–$5.00 per share. Shares of United Parcel declined 4.6%.

Among the sectors, the energy sector was severely impacted and the Energy Select Sector SPDR (XLE) dropped 1.6%. Chevron Corporation (NYSE:CVX), Marathon Oil Corporation (NYSE:MRO), Western Refining, Inc. (NYSE:WNR), Valero Energy Corporation (NYSE:VLO) and Marathon Petroleum Corp (NYSE:MPC) slumped 1.5%, 2.0%, 3.6%, 1.8% and 3.1%, respectively.

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