Disappointing earnings news weighed down the markets during the midday with the Dow dropping 59 points to 12,790. Nasdaq slipped 2 points to 2401.

On the upside

Blue Coat Systems (Nasdaq: BCSI) will pay approximately $268 million in cash to acquire bandwidth management company Packeteer (Nasdaq: PKTR).

Quest Diagnostics (NYSE: DGX) reported higher first quarter earnings with its acquisition of AmeriPath lifting revenue.

To raise cash, Jefferies Group (NYSE: JEF) will issue 26.6 million shares to Leucadia National (NYSE: LUK) in exchange for $533.6 million in Leucadia stock which Jefferies can sell for cash.

On the downside

Amylin (Nasdaq: AMLN) blamed disappointing sales of its diabetes drug Byetta for wider than expected first quarter losses.

MedCath (Nasdaq: MDTH) warned that second quarter results will fall short of estimates due to lower revenue.

Aladdin Knowledge Systems (Nasdaq: ALDN) disappointed with first quarter earnings that missed expectations as expenses surged. The software security company also cut is full year outlook.

In the broad market, declining issues outpaced advancers by a margin of more than 5 to 3 on the NYSE and by 7 to 5 on Nasdaq. The Russell 2000 which tracks small cap stocks fell 4 points to 717.