Stocks slid more than 1 percent on Tuesday as poor earnings from major multinationals confirmed fears about the slowing global economy and Moody's downgraded credit ratings for regions in Spain.
A number of the disappointing results including Dupont and United Technologies came from companies with operations across the globe and in many industries. The weak earnings and dwindling revenues have led to cost-cutting that will add to lost jobs in order to protect profits.
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"The writing has been on the wall for a while," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
"It's a very tough environment, tough to generate new revenues, so it shouldn't be too big a surprise we are having people miss on that front."
DuPont , another component of the Dow Jones industrial average, reported a lower-than-expected quarterly profit and announced 1,500 job cuts to offset falling sales around the world. Its shares tumbled 7.4 percent to $46.09 and pulled the S&P materials sector down 2.7 percent.
United Technologies Corp reported a 3.3 percent decline in third-quarter earnings and cut its sales forecast for the year, citing weak demand from airlines and an uncertain economy, sending shares down 0.5 percent to $77.46.
3M Co lost 3.1 percent to $99.65 after the diversified U.S. manufacturer cut its profit forecast for the full year as acquisition costs and a strengthening dollar hurt margins.
The three companies accounted for about 50 points of the decline on the Dow industrials.
Spanish borrowing costs rose after Moody's downgraded five of the country's regions, including economically important but deeply indebted Catalonia.
"We had gone through a period starting with (European Central Bank President Mario) Draghi's announcement from the ECB that he would stand behind the sovereign debt where Spain's situation had kind of faded from people's view and it's bubbling up again," Jankovskis said.
The Dow Jones industrial average dropped 184.78 points, or 1.38 percent, to 13,161.11. The Standard & Poor's 500 Index lost 19.58 points, or 1.37 percent, to 1,414.24. The Nasdaq Composite Index fell 34.14 points, or 1.13 percent, to 2,982.82.
The S&P 500 was below its 50-day moving average of about 1,434, a level which has acted as a strong support point in recent sessions and could signal further declines if convincingly broken.
United Parcel Service Inc reported a lower quarterly profit on Tuesday, citing slowing global trade, and said there was "some uncertainty" about the strength of the coming holiday season. Its shares, however, advanced 3 percent to $73.72 in premarket.
Of the 127 S&P 500 companies that have reported earnings through Monday, 61 percent have topped analysts' expectations, shy of the 62 percent average since 1994 and below the 67 percent average over the past four quarters.
Even more disconcerting to investors are top-line expectations. Through Monday morning 61 percent of companies having missed revenue expectations.
Overall earnings for S&P 500 stock index companies are expected to fall 2.4 percent in the third quarter from a year ago.
Some 33 S&P 500 companies are scheduled to post earnings on Tuesday.
Apple Inc shed 1.3 percent to $625.90. The company is expected to make its biggest product move on Tuesday since the iPad's debut two years ago, launching a smaller, cheaper tablet into a market staked out by Amazon.com Inc and Google Inc .
Whirlpool Corp gained 4.4 percent to $90.11 after reporting a higher-than-expected quarterly profit, helped by price increases and tight cost controls. The world's largest appliance maker raised its earnings outlook for the year.
The Federal Reserve's policy committee is scheduled to begin a two-day meeting on interest rates on Tuesday. The Federal Open Market Committee is likely to hold off from taking new action, opting instead to review the impact of last month's easing of credit while keeping a low profile in the last gathering before the November 6 general election.
(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)