CORRECTED - Wall St. sinks as weak forecasts add to dour mood; Nasdaq nears correction

(Corrects analyst name from "Ghasssy" to "Ghaussy" in 7th paragraph.)

By Amy Caren Daniel and Chuck Mikolajczak

(Reuters) - Wall Street sank on Tuesday, continuing a punishing month for U.S. stocks, as dismal outlook from industrial bellwethers Caterpillar and 3M sparked concerns over corporate growth and added to worries ranging from China's slowdown to Saudi Arabia's diplomatic isolation.

The S&P 500 has now declined for five straight sessions and had finished higher on only four of the 17 trading days this month. The benchmark index has lost 7.22 percent from its record closing high.

The Dow Jones Industrial Average is 6.83 percent down from its all-time closing high and the Nasdaq 9 percent. If the Nasdaq closes down 10 percent or more from its closing high, a level it hit in the session, it would confirm a correction.

Caterpillar tumbled 5.8 percent after the heavy-duty equipment maker maintained its 2018 earnings forecast, after having raised it in the previous two quarters. 3M Co slid 5.2 percent after cutting its full-year profit outlook due to currency headwinds.

That reignited worries over the impact of rising borrowing costs, wages and tariffs on corporate profits and caused S&P industrial stocks <.SPLRCI> to slide 2.24 percent.

Along with worries over profit growth, concerns over events such as the upcoming U.S mid-term elections and Italy's budget have also sent investors scrambling out of stocks.

"We are having another risk-off sentiment day," said Massud Ghaussy, senior analyst at Nasdaq IR Intelligence, in New York City.

"Negative news, which includes a slowdown in corporate earnings, trade tensions, any softening of economic data as a result of trade tensions, emerging (market) risk with the dollar rising, is adding to the viscous cycle of markets dropping."

The beaten-down technology sector <.SPLRCT> fell 1.37 percent, led by chipmakers, over concerns of slowing growth in China and ahead of key earnings.

Microsoft , Intel , Alphabet and Amazon , all due to report this week, were down between 0.2 percent and 2.4 percent.

"There's a reason why value has been outperforming growth. The tech sector has had a spectacular run over the past two years, and as monetary policy tightens, it's obviously affecting those that have rallied the most," said Ghasssy.

Profit growth at S&P 500 companies is expected to have slowed to 22.1 percent in the third quarter, from the previous two, according to Refinitiv data, and is expected to slow to 19.6 percent in the fourth quarter.

At 12:36 p.m. EDT the Dow was down 321.01 points, or 1.27 percent, at 24,996.40, the S&P was down 36.78 points, or 1.33 percent, at 2,719.10 and the Nasdaq Composite was down 89.57 points, or 1.20 percent, at 7,379.06.

The CBOE Volatility Index <.VIX>, Wall Street's fear gauge, rose 2.1 points, its sharpest jump in two weeks.

All 11 major S&P sectors were in the red, with the defensive utilities , real estate <.SPLRCR> and consumer staples <.SPLRCS> indexes posting the smallest losses.

Energy stocks <.SPNY> fell 3.50 percent, the most among the sectors, as oil prices plunged after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of U.S. sanctions on Iran. [O/R]

However, not all earnings report on the day were disheartening.

McDonald's rose 6.1 percent after it beat estimates for quarterly same-store sales on strong demand in international markets, while Verizon rallied to an 18-1/2-year high after beating estimates for profit and net new phone subscribers.

Declining issues outnumbered advancers for a 3.95-to-1 ratio on the NYSE and a 2.82-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 86 new lows, while the Nasdaq recorded two new highs and 364 new lows.

(Reporting by Amy Caren Daniel and Savio D'Souza in Bengaluru; Editing by Arun Koyyur)