Apple, which reported after the bell on Tuesday, sold more than 47.5 million iPhones during the three months ending in June, or 35 percent more than a year ago. As a result, net income soared nearly 38 percent in the second quarter, to $10.7 billion (9.8 billion euros).

But overall sales stayed below analysts' expectations. Investors are also concerned about Apple's new smartwatch, which the company hopes can become a flagship product in the future.

The California tech giant did not release precise sales figures for the watch, leaving a sour taste in investors' mouths.

The company forecast revenue of between $49 billion and $51 billion, which also missed analysts' estimates. Apple shares fell 7 percent in after hours trading.

Microsoft's biggest quarterly loss

Meanwhile, Microsoft reported a $3.2 billion quarterly loss, its biggest ever, on falling demand for its Windows operating system and a huge writedown on its Nokia phone business. Its shares also dropped late on Tuesday.

The Seattle-based company had to take charge of $7.5 billion in the last quarter of 2014 related to the restructuring of its Nokia handset business, which it bought last year.

Sales of Windows to computer manufacturers to install on new PCs fell 22 percent in the quarter. The company is scheduled to roll out Windows 10 on July 29, a much-awaited launch after a lackluster response to Windows 8.

Apart from shifting to Cloud services to compensate for tepid demand for traditional operating systems, Microsoft wants to generate revenue by building search and gaming into the Windows 10 interface.

Yahoo still under scrutiny

Yahoo also could not lift the mood on Wall Street, as it reported a quarterly net loss of $21 million compared with net income of $270 million a year before.

Yahoo has been struggling in recent years after losing its search engine crown to Google.

Current chief executive Marissa Mayer has been trying to tap new markets, focusing on mobile services, native advertising, video and social media, which she has summed up as "mavens."

Mayer assured investors that the recovery was making "great progress" and that she was "pleased with the revenue growth," which rose by 15 percent in the quarter. But analysts are still not confident that Yahoo has turned the corner, sending shares lower.

Investors were also digesting earnings from IBM and Sikorsky owner United Technologies, which reported after the market closed on Monday and saw the Dow Jones in the red all day Tuesday.

United Technologies fell as much as 6.6 percent to $103.18 and was the biggest loser on the Dow, after the company cut its full-year profit outlook, citing lower demand from powerhouse China.

IBM's shares fell as much as 5.3 percent to $164, a day after the company's revenue fell for the 13th consecutive quarter.

ng/kms (Reuters, AP, AFP, dpa)