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S&P 500 lands at 8-week low; Europe slowdown weighs

U.S. stocks fell sharply on Tuesday, extending losses into a second session, as investors fretted slowing economic growth in Europe and the potential impact on coming third-quarter earnings from U.S. corporations.

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"We could see a continuation of these 100-plus-point-day moves as investors worry about could this be the end of a three-year run without a correction," said Kate Warne, investment strategist at Edward Jones.

The CBOE Volatility Index jumped 11 percent to 17.22 and the Russell 2000 Index of smaller-cap companies shed 1.7 percent.

General Motors declined after Morgan Stanley cut its outlook on GM earnings and as the auto manufacturer's fund chief raised the count of those killed in crashes related to defective ignition switches. CF Industries Holdings rallied after Yara International canned its chief executive, saying it was not suited to leading merger discussions with the fertilizer maker.

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"It's heightened concern about the slowdown in global growth, highlighted by the IMF forecast this morning, and whether earnings will keep growing," said Warne of the factors propelling stocks lower.

The International Monetary Fund downgraded its global growth forecast for this year and 2015, with the organization that represents 188 countries now projecting world growth to come in at 3.3 percent in 2014, down 0.1 percent from its July forecast. Next year, it expects growth of 3.8 percent.

"The economic data from Germany and France in particular has been weaker than expected," said James Liu, global market strategist at J.P. Morgan Funds.

German industrial output fell by 4 percent in August, with the worse-than-expected drop coming a day after the country's industrial orders had their largest monthly decline since the global financial crisis in 2009.

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"Our chief concern is how much will the slowdown in the European economy impact the earnings outlook for the third quarter and, more importantly, guidance for the fourth," said Art Hogan, chief market strategist at Wunderlich Securities.

"The dollar is stronger against the euro for a reason," Hogan added.

"The reality is the U.S. on a relative basis is looking a lot better," Nick Raich, CEO of The Earnings Scout, said. But there's a "lot of fear and speculation that a strong dollar and weak growth are going to affect earnings."

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After a 276-point fall, the Dow Jones Industrial Average lost 272.58 points, or 1.6 percent, to 16,719.33, with Caterpillar leading blue-chip losses that extended to 29 of 30 components.

The S&P 500 dropped 29.72 points, or 1.5 percent, to 1,935.10, its lowest level since Aug. 12, with industrials hardest hit and all 10 of its main industry groups losing ground.

The Nasdaq shed 69.60 points, or 1.6 percent, to 4,385.20.

For every share rising, more than three fell on the New York Stock Exchange, where nearly 791 million shares traded. Composite volume approached 3.7 billion.

The dollar declined against the currencies of major U.S. trading partners and the 10-year Treasury note yield, used to figure mortgage rates and other consumer loans, fell 8 basis points to 2.34 percent.

On the New York Mercantile Exchange, gold futures for December delivery rose $5.10 to $1,212.40 an ounce; crude-oil futures for November declined $1.49 to $88.85 a barrel.

On Monday, U.S. stocks declined, with investors adopting a cautious approach two days before the release of minutes from the Federal Reserve's last meeting and quarterly earnings.

Coming Up This Week:

Wednesday

Earnings: Alcoa, Costco, Monsanto, RPM International, Ruby Tuesday

7:00 a.m. Mortgage applications

8:30 a.m. Chicago Fed President Charles Evans

1:00 p.m. 10-year note auction

2:00 p.m. FOMC minutes

Thursday

IMF fall meeting

Earnings: PepsiCo

Chain store sales

8:30 a.m. Initial claims

9:00 a.m. Philadelphia Fed President Charles Plosser on monetary policy

10:00 a.m. Wholesale trade

10:30 a.m. St. Louis Fed President James Bullard, opening remarks at St. Louis Fed conference

10:30 a.m. Oil inventories

11:00 a.m. ECB President Mario Draghi at Brookings, DC

11:00 a.m. Fed Vice Chair Stanley Fischer at Brookings on ECB

1:00 p.m. 30-year bond auction

1:10 p.m. Fed Gov. Daniel Tarullo on regulatory reform

1:15 p.m. Richmond Fed President Jeffrey Lacker on growth and the labor markets

1:30 p.m. Fed's Fischer at IMF on global economy

3:40 p.m. San Francisco Fed President John Williams on economic outlook

Friday

Earnings: Fastenal, Infosys, Progressive

IMF fall meeting

8:30 a.m. Import prices

9:00 a.m. Philadelphia Fed's Plosser on monetary policy

1:00 p.m. Kansas City Fed President Esther George on economy

2:00 p.m. Richmond Fed's President Jeffery Lacker on the economy

2:00 p.m. Treasury budget

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