(Reuters) - Wall Street dropped on Tuesday as high bond yields in Spain remained an overhang and a round of disappointing profit outlooks highlighted the effect of the euro zone debt crisis on corporate profits.

United Parcel Service (UPS.N), seen by many as a proxy for economic activity, reported quarterly results that missed forecasts and cut its 2012 outlook, citing uncertain global economic conditions. The shares fell 3.8 percent to $74.90, pulling the Dow Jones Transportation average .DJT down 1.1 percent.

"You look at UPS and FedEx and you think 'they are sort of the temperature takers of what is going on and if they are tanking why should I step in front of that moving train,'" said Cummins Catherwood, managing director, Boenning and Scattergood in West Conshohocken, Pennsylvania.

"The bigger part to me is when (companies) get through reporting whatever the earnings were they are also saying they don't like what is out there - we are looking down a murky road and it doesn't look cool."

Whirlpool Corp (WHR.N) slumped 6.4 percent to $62.98 after the world's largest appliance maker missed Wall Street's expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar.

According to Thomson Reuters data, of the 145 companies in the S&P 500 that have reported earnings to date for the second quarter, 66.9 percent have reported earnings above analyst expectations. Over the past four quarters, 68% of companies beat estimates.

Concerns about the euro zone focused on Spain's high borrowing costs due to fears the country may seek a bailout, a survey showing Germany's private sector shrank for a third straight month, and Moody's move to cut Germany's rating outlook to negative.

The Dow Jones industrial average .DJI dropped 88.74 points, or 0.70 percent, to 12,632.72. The Standard & Poor's 500 Index .SPX .INX lost 8.94 points, or 0.66 percent, to 1,341.58. The Nasdaq Composite Index .IXIC fell 10.16 points, or 0.35 percent, to 2,879.99.

The decline put the S&P 500 on track for its third straight loss.

Indicating the economic malaise from Europe is affecting multiple sectors, Texas Instruments Inc's (TXN.O) second-quarter profit beat Wall Street expectations but the company warned that its third-quarter revenue would be weaker than usual as customers are cautious due to global economic uncertainties. The shares lost 1.3 percent to $26.48. .

Spanish five-year government bond yields rose above 10-year yields for the first time since June 2001 on Tuesday, as investors fretted about the possibility that Madrid may need a full-blown sovereign bailout. The 10-year last traded at around 7.6 percent. {GVD/EUR]

An even gloomier picture for the overall euro zone's private sector, which shrank for a sixth month in July as manufacturing output nosedived, added to the likelihood that the bloc will slump back into recession.

AT&T Inc (T.N) lost 2.3 percent to $34.58 after posting its second-quarter earnings. The S&P telecom index .GSPL dropped 1.7 percent.

(Reporting by Chuck Mikolajczak, editing by Dave Zimmerman)

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