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The markets fell solidly into the red Tuesday, led lower by the technology sector, as traders braced for third-quarter earnings season and examined economic reports.
As of 12:20 p.m. ET, the Dow Jones Industrial Average fell 80.5 points, or 0.6%, to 13501, the S&P 500 dipped 10.8 points, or 0.74%, to 1445 and the Nasdaq Composite slumped 40.4 points, or 1.3%, to 3072.
Technology stocks led the way lower on Tuesday, with many big-name companies taking a heavy thrashing. In particular, Apple (AAPL), Intel (INTC), Research in Motion (RIMM), eBay (EBAY) and Netflix (NFLX) were among the high-profile under-performers of the day. The technology-heavy Nasdaq dropped 1.4% in afternoon action. Other sectors deep in the red were consumer discretionary, telecommunications, and health care. The only major sector in the green was energy.
After a quiet trading day on Monday, market participants had a slew of information to parse through on Tuesday.
The International Monetary Fund sliced its outlook for global economic growth to 3.3% for 2012 and 3.6% for 2013 from a July projection of 3.5% and 3.9%, respectively.
"The (economic) recovery has suffered new setbacks, and uncertainty weighs heavily on the outlook," the IMF said in its report, noting that "viability of the euro area or major U.S. fiscal policy mistakes, continue to preoccupy investors."
Indeed, Goldman Sachs Chief Economist Jan Hatzius wrote in a note to clients Monday that risks to U.S. growth are "skewed to the downside. The biggest concern is fiscal policy, where we see three scenarios: the not-so-good, the bad, and the ugly." Hatzius estimates the fiscal drag will is likely to cut 1.5 to 2 percentage point from gross domestic product in early 2013, from 0.75 percentage point in 2012.
Adding to the gloomy economic sentiment was a report from the National Federation of Independent Business showing U.S. small business sentiment slipped in September for the fourth month in five. Echoing warnings from the IMF and Goldman, NFIB chief economist William Dunkelberg wrote in a release that "small-business owners are reporting that the political climate is a reason not to expand—second only to the economy, which is only keeping up with population growth."
Analysts were also paying close attention to developments abroad.
European Union finance ministers met on the day following a smaller summit of eurozone finance chiefs on Monday.The group is expected to discuss a range subjects, including a potential rescue plan for Spain. German Chancellor Angela Merkel also visited Greece for the first time since the beginning of the financial crisis three years ago. Thousands staged protests against the German premier who is seen as the face of harsh austerity measures aimed at getting Greece's immense public debt under control.
On the corporate front, Alcoa (AA) is set to post its quarterly earnings after the close of trading. Analysts are expecting the aluminum giant to have broken even in the third quarter quarter after posting a profit of 14 cents a share a year ago.
Overall, analysts are forecasting a 1.4% year-over-year drop in S&P 500 earnings -- the first dip since the third quarter of 2009, according to S&P Capital IQ.
Oil futures bounced back after falling for the second day in a row on Monday. The benchmark contract traded in New York rallied $2.80, or 3.1%, to $92.11 a barrel. Wholesale New York Harbor gasoline jumped 2.8% to $2.973 a gallon.
In metals, gold fell $5.60, or 0.31%, to $1,770 a troy ounce.
The Euro Stoxx 50 dipped 0.96% to 2472, the English FTSE 100 slipped 0.54% to 5810 and the German DAX slumped 0.78% to 7235.
In Asia, the Japanese Nikkei 225 sold off by 1.1% to 8770 and the Chinese Hang Seng rose 0.54% to 20937.