Lower corporate earnings and reports that a key meeting between European financial ministers had been cancelled pulled stocks lower Tuesday. Assets that tend to hold their value in a weak economy like U.S. government debt and gold rose.
The Dow Jones industrial lost nearly 150 points in afternoon trading after several poor earnings reports from major U.S. companies. Manufacturing conglomerate 3M cut its 2011 earnings forecast, and U.S. Steel warned that demand for its products could slow. Netflix Inc. plunged 36 percent after the company cut its profit forecast and said it is losing subscribers following a price increase in July.
The market was also pulled lower by a report that consumer confidence plunged in October to the lowest level since March 2009. The Conference Board index measures how shoppers feel about business conditions, the job market and their outlook for the next six months.
The Dow was down 145 points, or 1.2 percent to 11,768 at 2:45 Eastern. 3M fell 6.4 percent, the largest drop among the 30 stocks that make up the Dow average. It was the first decline after three days of gains.
The Standard & Poor's 500 index fell 05, or 1.5 percent, to 1,235.
The Nasdaq dropped 49, or 1.8 percent, to 2,650.
Prices for assets perceived to be safe havens rose. The yield on 10-year Treasury notes fell to 2.13 percent from 2.23 percent late Monday. Bond yields fall when investors send their prices higher. Gold rose 2.9 percent.
The latest headlines from Europe cast doubt over whether leaders there can agree on a comprehensive solution for the region's debt crisis in time for a summit Wednesday. Europe's ongoing debt crisis has been behind much of the market's big moves lately.
European officials are working to patch together a plan that will prevent banks from taking huge losses if the Greek government defaults on its bonds. A messy default could lead to a credit freeze-up similar to the one in 2008 following the fall of Lehman Brothers.
Anticipation of a solution to Europe's debt mess and strong profit reports from Caterpillar Inc., McDonald's Inc. and other major U.S. companies helped the S&P 500 surge 14.1 percent from Oct. 3, when it slumped to its lowest point of the year, through Monday's close. Traders warn that if European leaders fail to come up with a credible solution it could sent markets sharply lower.
United States Steel Corp. dropped 7 percent after the nation's largest steelmaker warned that demand for some of its products could decline in the final three months of the year if the economy slows down more.
Delta Air Lines Inc. slumped 2.5 percent after the airline reported results that missed Wall Street's expectations. Delta cut its flights 1 percent in the most recent quarter and said it would cut as much as another 5 percent during the last three months of this year.
United Parcel Service fell 1.5 percent after the company said its growth in Asia was slowing. First Solar Inc. plunged 24 percent after the company said its chief executive had stepped down.