A stronger dollar and a surprise interest rate hike in China that may slow that country's economy helped push stocks sharply lower Tuesday.
The Dow Jones industrial average fell below 11,000 for the first time in a little more than a week, reversing a streak that had pushed the index up nearly 7 percent for the year. It was the largest drop the stock market since early August.
The announcement that China, whose rapid growth has helped pull the global economy along, raised a key interest rate to fight inflation sent U.S. stocks lower.
Disappointing news from Apple Inc. and IBM Corp. pushed the technology-heavy Nasdaq down about 2 percent. Both companies beat earnings forecasts when they reported results late Monday, but each delivered news that investors didn't like. Apple Inc. didn't sell as many iPads as analysts had hoped and a measure of profitability was lower than expected. IBM Corp.'s outsourcing business didn't do as well analysts predicted.
Shares of Apple fell 2.6 percent, to $309.49. Apple's shares have gained 9.1 percent this quarter.
The Dow Jones industrial average fell 165.07, or 1.5 percent, to 10,978.62. Standard & Poor's 500 index fell 18.81, or 1.6 percent, to 1,165.90, while the Nasdaq composite index fell 43.71, or 1.8 percent, to 2,436.95.
"On average, the earnings reports have beaten expectations, but now investors are asking, 'What's next?'," said Jonathan Satovsky, the head of Satovsky Asset Management. "Even Apple reduced guidance for the fourth quarter of the year."
The dollar rose 1.7 percent against a basket of currencies, while gold fell 2 percent.
The strengthening dollar led to a broad selloff of commodities. That dragged down stocks of companies in the energy and materials sectors of the Standard and Poor's 500, which were both down more than 2 percent.
"The dollar rebounded pretty significantly today and that's one of the primary drivers of the market," said John Pandtle, who is a co-manager of the Eagle Large Cap Value fund.
For weeks, traders have been anticipating that the Federal Reserve will expand a program to buy bonds in hopes of encouraging spending. That has led many investors to buy stocks despite questions about the strength of the economic recovery.
"We're seeing a mixed bag from earnings reports and housing numbers," said Doug Roberts, the chief investment strategist for Channel Capital Research, citing a recent report that showed a slight increase in homebuilder confidence. "If the Fed wasn't sitting there following through with liquidity, then we'd be in a very different situation."
Shares of Bank of America Corp. fell 54 cents, or 4.38 percent, after the company reported a loss because of a one-time charge tied to credit and debit card reform legislation passed this year. A group of investors including BlackRock and Pacific Investment Management Co. are reportedly attempting to force the bank to repurchase mortgages put out by Countrywide Financial Group, a subsidy of Bank of America that the company purchased in 2008. BlackRock and Pimco declined to comment.
Goldman Sachs Group, Inc., which reported results before the bell, earned $1.74 billion, or $2.98 a share, much higher than the $2.32 per share analysts predicted. Shares rose $3.02, or 1.9 percent.
Earnings have been the focus for many investors this week as 113 of the 500 companies in the Standard and Poor's 500 index report third-quarter results. Four of the 30 companies that make up the Dow announced earnings today.
Some traders may be taking earnings annoucements as an opportunity to sell and record gains. "We're seeing some profit-taking today after the tremendous September and first week of October that we've seen in the market," said Eric Marshall, the director of research at Hodges Capital.
Bank of America's 4.38 percent drop was the largest fall in the Dow. Coca Cola Co., which reported earnings Tuesday, was one of only two stocks in the index with gains. The other was chipmaker Intel Corp.
Bond prices rose. The yield on the benchmark 10-year Treasury note fell to 2.48. It traded late Monday at 2.51 percent.