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Fears that European policymakers won't act to stem the region's debt crisis before it spreads to larger economies, coupled with a bout of downbeat economic and corporate data, spooked traders and sent the markets falling sharply.
As of 3:00 p.m. ET, the Dow Jones Industrial Average fell 122 points, or 1%, to 11,791, the S&P 500 slipped 16.5 points, or 1.3%, to 1,238 and the the Nasdaq Composite slumped 42.9 points, or 1.6%, 2,657.
Traders have been keeping a close eye on Europe, where euro zone policymakers were set to meet on Wednesday in the second summit in four days to discuss the region's deepening debt crisis. The Wall Street Journal reported a summit of finance ministers has been called off. However, a European Council spokesperson confirmed that a meeting between euro zone heads of state is still on.
"We can confirm that the informal meeting of [European Union] Heads of State or Government and the follow-up meeting of Euro summit will take place tomorrow as scheduled," a spokesperson wrote in an e-mail to FOX Business.
Analysts are expecting clarity on how much the currency bloc plans on leveraging its rescue fund, what steps it will take to recapitalize the region's banking sector, and specifics on how it will structure Greece's bailout.
It appears, however, that leaders are paring back expectations ahead of the summit. Reuters quoted a European Union official as saying it is likely that leaders will hammer out details on the rescue of Greece, but specifics on how to leverage the region's bailout fund remained up for question.
The issue of leverage has been particularly contentious: the French strongly supported the fund having the ability to sell troubled sovereign debt to the ECB, which would dramatically increase its firepower, but that proposal has been shot down by the Germans, who are seeking to limit financial exposure to the crisis striking periphery nations. The crisis is reaching an intense moment where it is threatening larger economies such as France and Italy, and leaders across the world have pressured European officials to act swiftly.
The euro fell by 0.37% to $1.390, while the greenback fell 0.19% against a basket of world currencies. Euro zone blue chips dipped 1.1%.
Housing, Consumer Confidence Take Spotlight
Consumer confidence was much lower than expected in October. The Conference Board's gauge came in at 39.8, down from 46.4 the prior month, and far weaker than the 46 economists had expected. Confidence took a big hit from the late-summer market turmoil, and continued uncertainty over the economy and U.S. fiscal policy. Consumers' faith that the economy will remain strong is a key component in buying decisions, meaning these data are particularly important with the crucial holiday shopping season set to begin shortly.
The S&P/Case-Shiller composite index of 20 metropolitan areas showed home prices rose 0.2% in August from July on a non-seasonally adjusted basis, a smaller increase than the 0.4% rise economists had expected. Price are down 3.8% from last year, a deeper drop than the 3.5% economists anticipated.
Home prices have been adversely affected by anemic demand in many areas of the country, a glut of supply, and weak overall economic conditions.
Corporate earnings were also in focus on Tuesday morning.
3M (NYSE:MMM) earned $1.52 a share in the third quarter, falling far short of expectations of $1.61 a share. The diversified technology company, and Dow component, also sliced its full-year earnings forecast, sending shares falling sharply. Shipping company UPS (NYSE:UPS), sometimes regarded as a bellwether, unveiled net profits of $1.06 a share for the third quarter, beating estimates by a penny.
Dupont (NYSE:DD) unveiled quarterly earnings of 69 cents a share, excluding one-time charges, easily topping analysts' estimates of 56 cents. The chemical maker's sales of $9.2 billion also zipped past estimates of $8.79 billion.
Xerox (NYSE:XRX) posted adjusted quarterly profits of 26 cents a share, beating expectations by a penny. Netflix (NASDAQ:NFLX) reported after the closing bell on Monday, and warned that it lost more customers than expected as a result of twin mistakes: a steep price hike on its video rental and streaming service, and then an abrupt split into separate streaming and DVD businesses that caused widespread upset disappoint among once loyal customers. Shares were pummeled in early trade, nose diving as much as 37%.
Oil got a boost from a weaker dollar, and speculation that flooding in Thailand may increase demand in the region. Light, sweet crude jumped $1.90, or 2.1%, to $93.17 a barrel. Wholesale RBOB gasoline slipped a penny, or 0.41%, to $2.70 a gallon.
In metals, gold jumped $48.10, or 2.9%, to $1,700 a troy ounce. Yields on government debt nudged lower. The benchmark 10-year note yields 2.235% from 2.239%.
The English FTSE 100 slid 1.1% to 5,525 and the German DAX dipped 0.14% to 6,047.
In Asia, the Japanese Nikkei 225 slumped 0.92% to 8,762 and the Chinese Hang Seng jumped 1.1% to 18,968.