Stocks end lower: Apple's 4% drop deflates Dow

All three major U.S. stock indexes fell on Wednesday, dragged down by Apple (AAPL) after shares of the world's most-valuable company fell 4.3% in response to a disappointing sales outlook.

At the 4 p.m. ET closing bell, the Nasdaq composite had fallen 0.7%, a 36-point drop to 5171.77.

The Dow declined 68 points, or 0.4%, to 17,850.91. Upbeat earnings reports before the opening bell from Dow components Boeing (BA) and Coca-Cola (KO) did little to cushion the Dow's fall, due largely to disappointing results after Tuesday's post-closing bell reports from both Apple and software giant Microsoft (MSFT), which posted a $3.2 billion quarterly loss, its biggest ever.

The daily gyrations of Apple shares have a huge impact on the major U.S. stock indexes. The iPhone maker has the largest market value of all the companies in both the Standard & Poor's 500-stock index and Nasdaq composite and, therefore, has an outsized impact on both indexes, which are weighted by market capitalization.

Similarly, Apple stock, which lost $5.61, or 4.3%, to $125.14, is also among the Dow Jones industrial average's highest-priced stocks, and that means it has a big influence on the daily movements of the price-weighted Dow.

Microsoft ended down 3.7% to $45.41. Boeing gained 1% and Coca-Cola shed 0.7%.

The Standard & Poor's 500 index was down 0.2% and the Nasdaq composite index dropped 0.6%, as the tech-packed index took the brunt of the losses. On Monday, the Nasdaq notched a record closing high of 5218.86.

Oil prices tumbled more than 3% and fell below $50 a barrel as U.S. benchmark crude dropped $1.69 to $49.18.

It was the second straight trading session in which the blue-chip stock gauge was dragged down by earnings from its components that fell short of Wall Street expectations. Yesterday, weak earnings from IBM (IBM) and United Techologies (UTX) dragged down the Dow. Stocks fell sharply Tuesday as the Dow tumbled 181 points.

Ironically, Apple topped both earnings and revenue forecasts, but was dragged down by a sales outlook for the current quarter that fell short of Wall Street's high expectations.

So far in the second-quarter earnings season, 70% of the 102 companies in the S&P 500 that have reported have topped expectations, vs. the 63% long-term "beat" average, according to earnings-tracker Thomson Reuters. Still, 21% have come up short, which is in-line with longer-term averages. Profit growth for the second-quarter is now on track for a contraction of 1.5%, however, which is better than the -3% projection back on July 1.

The problem for Wall Street is weak revenues. Only 55% of companies have topped sales forecasts, below the long-term average of 61%. Revenues are seen contracting 3.8% in the second quarter.

Investors did get a lift from more data showing a continued rebound in the housing market. June existing home sales rose 3.2% in June vs. May, with sales coming in at annualized pace of 5.49 million units, an eight-year high.

Investors are also looking to next week’s Federal Reserve policy meeting for clues about the possible timing of interest rate hikes, after Fed chair Janet Yellen last week said she expects the Fed to raise rates this year.

European markets were sharply lower: Britain’s FTSE 100 dropped 1.5%, Germany’s DAX index was 0.7% lower and France’s CAC 40 lost 0.5%.

In Asia, Japan’s Nikkei 225 index dropped 1.2% while Hong Kong’s Hang Seng index was 1% lower. The Shanghai Composite rose 0.2%.

Contributing: Associated Press