Global shares and the euro fell sharply on Tuesday after a slew of weak U.S. corporate earnings results and credit ratings downgrades of several indebted regions of Spain.
The Dow Jones Industrial Average was down nearly 2.0 percent, on disappointing profits and earnings outlook from large multinational companies including Dupont
The euro slid to its lowest since October 16 against the U.S. dollar to $1.2972, and last traded at $1.2974, down 0.7 percent on the day. The euro also dropped against the yen.
Bond prices in Spain fell after rating agency Moody's downgraded five of the country's regions, including economically important but deeply indebted Catalonia.
"Investor sentiment has definitely changed from just a couple weeks ago when everything was received as good news to fear," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
"We've been hit today again with the harsh reality which is weak results and ongoing problems in the euro zone."
The decline in stock prices was broad - all 10 of S&P 500 sectors were down - with Dupont shares were down 8.0 percent at $45.75 and 3M shares fell 3.0 percent to $89.60.
The Dow Jones industrial average was down 230.19 points, or 1.72 percent, at 13,115.70. The Standard & Poor's 500 Index was down 23.04 points, or 1.61 percent, at 1,410.78. The Nasdaq Composite Index was down 37.00 points, or 1.23 percent, at 2,979.96.
U.S. EARNINGS DISAPPOINT
Of the 127 S&P500 stock index companies that have reported earnings through Monday, 61 percent have topped analysts' expectations, below the 62 percent average since 1994 and below the 67 percent average over the past four quarters.
Even more disconcerting to investors are expectations for revenues. 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.
The CBOE Volatility index VIX, Wall Street's so-called fear gauge, jumped 17 percent to 19.39, the highest level since July.
Some 33 S&P 500 companies are scheduled to post earnings on Tuesday. Facebook Inc
SPAIN'S ECONOMY CONTRACTS AGAIN
In other European news, according to Spain's central bank, the fourth largest economy in the euro zone contracted in the third quarter. European stocks hit their lowest level in one and a half weeks, and the euro extended losses versus the dollar, hitting global session lows.
European shares extended their earlier losses, with a key index falling to a its lowest level in one and a half weeks. The FTSEurofirst 300 index was down 1.7 percent at 1,089.01 points, its lowest intra-day level since October 11. Global shares fell 1.4 percent.
Financial markets are still waiting for a fiscalbailout request from Spain to trigger the European Central Bank's new bond-buying program, which many believe would draw a line under any threat of default from the euro zone's fourth-largest economy.
ECB Executive Board member-in waiting, Yves Mersch, told an audience in Berlin that while there was no limit in terms of the amount of bonds the ECB could buy, there was a time limit.
Shortly before he spoke Spain sold short-term debt, with yields rising slightly on three-month paper and falling on six-month paper.
BERNANKE ERA MAY BE CLOSING
In the U.S., the Federal Reserve's policy committee is set to begin the first day of a two-day meeting on interest rate policy on Tuesday. The Federal Open Market Committee is likely to hold off from taking fresh steps at the meeting, opting to review the impact of the significant action it took last month and keep a low profile in its last gathering before the November 6 general election.
The New York Times reported Fed Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election.
Oil prices fell below $108 a barrel on Tuesday as investors brushed off Iran's threat to halt exports if the West tightens sanctions and focused on a fragile world economy and its impact on oil demand growth.
Brent crude for December delivery was down $1.70 to $107.73 per barrel. U.S. December crude was down $2.60 at $86.05 a barrel.
The benchmark 10-year U.S. Treasury note was up 17/32, with the yield at 1.7555 percent.
