The Fed Faces-Off Against Weak Earnings and a Crumbling Europe

In what is being viewed as an unusual development, sources told reporters at the Wall Street Journal that the Fed could move to stimulate the economy as early as next week. After three days of sharp declines on both the S&P 500 and the Dow, many are saying help can't come soon enough to save the U.S. economy.

Investors were shocked on Tuesday after Apple (Nasdaq: AAPL) earnings and sales came in below expectations. The bad news threatens to derail positive investor sentiment, which was already rattled by grossly negative headlines out of Europe.

Wall Street darling, Apple (Nasdaq: AAPL), sold only 26 billion iPhones in the 3rd quarter, up 28 percent from last quarter, but below the 30 million some were expecting. The company reported revenues of $35 billion. While up from $28.6 billion last year, revenue was below the consensus of $37.2 billion expected. Shares were off significantly in after-hours trading.

Negative headlines out of Europe set a bearish tone at the open on Tuesday. Investors continue to eye Spanish bond yields which are now at an eye-popping 7.537 percent. The incredibly high yields are causing investors to wonder how much longer Spain can hold out before it seeks a full bailout from other EU countries.

After a recent wave of disappointing economic news, conversations inside the Fed are focused on the question of when to how to move. Central-bank officials could take new steps at their meeting next week, July 31 and Aug. 1, according to the WSJ report.

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