This Is the Reason the S&P 500 Tumbled for a 2nd Straight Day


All the kings horses and all the kings men better come together to help put the U.S. economy back together again, or we could be in for some serious trouble come two months from now. With everyone's focus now shifted from the U.S. presidential election to the Congressional gridlock that threatens to raise taxes and dramatically reduce military spending on Jan. 1, investors are signaling a bleak outlook for stocks, in general, until this looming tax hike and spending cut is dealt with.

After tumbling more than 2% yesterday, the S&P 500 (INDEX: ^GSPC) shed another 17.02 points (-1.22%), to end at 1,377.51.

Weak quarterly earnings reports and updates are only adding to an already skittish market.

McDonald's (NYS: MCD) , earlier today, reported its first same-store sales decline in more than nine years! Total same-store sales fell 1.8% versus the year-ago period, with the fast-food super chain noting increased competition and tepid European demand as the reason for the decline. It should be noted that U.S. same-store sales also fell 2.2%, proving that rising food costs, shrinking consumer spending, and its competitors mirroring its menu are indeed taking a bite out of McDonald's bottom line. Shares fell by 2% to a new 52-week low.

Natural and organic grocer Whole Foods Market (NAS: WFM) also failed to impress investors with its full-year earnings forecast, falling 6% on the day. Although Whole Foods' quarterly report highlighted a 50% boost in net income, its full-year EPS guidance of $2.83-$2.87 fell short of the Street's projections of $2.91. Furthermore, these results don't include the company's expected impact from Hurricane Sandy. Whole Foods doesn't have a history of guiding aggressively but, along with McDonald's, this could be a clear indication of tighter consumer spending on the horizon.

In the telecom space, Windstream (NAS: WIN) took the title of disaster du jour within the S&P 500, falling 10% to a three-year low, after disappointing on earnings for a third-straight quarter. Windstream recently purchased Paetec to boost its traditional phone business, but has needed to offer more promotion pricing to draw in customers, and has experienced slow growth in sales of connection to cell towers. Both factors are crushing margins and forced Windstream to lower its earnings expectations going forward, yet again.

If there was one bright spot to today's nasty tumble, it was Qualcomm (NAS: QCOM) , which rose by 4% after reporting better-than-expected fourth-quarter results. Revenue for the quarter rose 18%, with net income shooting 16% higher, as demand for 3G and 4G LTE smartphone and tablets boosted demand for its mobile chips. Having supply deals with Apple for the iPad and iPhone, as well as numerous other deals with Samsung and other mobile device suppliers, Qualcomm's immediate future does indeed look very bright.

Headed to the dollar menu?
Is McDonald's disappointing same-store sales figure a sign that the golden arches are headed back to the dollar menu? Find out the answer to this question and much more by getting your copy of our latest premium research report on McDonald's. Packed with in-depth analysis on the opportunities and threats facing McDonald's - and complete with a year of regular updates - this report will give you the tools you need to make smart long-term investing decisions.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of McDonald's, Whole Foods Market, Qualcomm, and Apple. Motley Fool newsletter services have recommended buying shares of McDonald's, Whole Foods Market, and Apple, as well as creating a bull call spread position in both McDonald's and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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