US STOCKS-Wall St falls as Europe drags on profit outlooks

* UPS cuts 2012 outlook, Texas instruments warns on Q3

* Cisco falls on VMWare move

* AT&T falls, telecom index drops

* Indexes: Dow down 1.2 pct, S&P down 1.2 pct, Nasdaq off 0.8 pct

By Chuck Mikolajczak

NEW YORK, July 24 (Reuters) - Wall Street dropped on Tuesday as concerns over Spain and Greece weighed on the market and a round of disappointing profit outlooks highlighted the effect of the euro zone debt crisis on corporate earnings.

United Parcel Service, 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 5.1 percent to $74, pulling the Dow Jones Transportation average down 1.6 percent.

AT&T Inc lost 2.7 percent to $34.43 after the company pulled back its outlook for business services this year despite its better-than-expected quarterly profit. The S&P telecom index dropped 2.1 percent as the worst performing S&P sector.

"We are going through an adjustment period where there has been a lot of talk about Europe facing a recession in 2012, now we are actually seeing it in the earnings and the market is reacting to that," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

Whirlpool Corp 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 through Tuesday morning, 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 percent of companies beat estimates.

Concerns about the euro zone focused on Spain's high borrowing costs as the country paid the second highest yield on short-term debt since the birth of the euro and EU officials said Greece had little hope of meeting the terms of its bailout.

"People are jumping to the conclusion they won't get any more money than they need to in order to pay back the ECB and therefore they will exit the euro," said Dudack.

Cisco Systems Inc lost 5.8 percent to $15.13 after VMWare Inc said it would acquire privately-held Nicira Inc, a move seen as a threat to Cisco's core switching and routing business.

The Dow Jones industrial average dropped 150.50 points, or 1.18 percent, to 12,570.96. The Standard & Poor's 500 Index lost 15.50 points, or 1.15 percent, to 1,335.02. The Nasdaq Composite Index declined 23.54 points, or 0.81 percent, to 2,866.61.

DeVry Inc dropped 24.1 percent as the biggest percentage decliner on the S&P 500 after the for-profit education provider warned that profit for the June quarter will fall far short of market expectations.

The decline put the S&P 500 on track for its third straight loss as the index again tested its 50-day moving average, a technical support level which could trigger more selling if convincingly broken.

Indicating the economic malaise from Europe is affecting multiple sectors, Texas Instruments Inc 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.