Stocks were mired in negative territory Monday, as investors saw their worries about how corporate earnings would reflect weak economic conditions amplified by the latest warning from Treasury Secretary Henry Paulson.
Major indexes were near session lows with about an hour and a half left in a lackluster trading day. Commodities and financials were taking the biggest hits.
"Commodities are getting stocks nervous again," Art Cashin, director of floor operations at UBS, told CNBC. "A deflationary pattern is evolving."
Earnings season was on the minds of many on Wall Street, with Dow component Alcoa set to report after the bell and the company's shares already lower from an analyst downgrade.
In the meantime, Wal-Mart continued to be one of the market's few bright spots amid all the consumer weakness and unemployment. Its CEO, Lee Scott, joined in the chorus of economic gloom during a speech at the National Retail Federation's annual conference, but he also issued a call for the public and private sectors to cooperate to tackle health care and environmental issues.
Energy also acted as a drag on the market, with crude oil prices tumbling more than $3 to below $38 a barrel, despite Saudi Arabia's pronouncement over the weekend that it would cut production even below OPEC guidelines. Traders instead focused on the pervading belief that the global downturn would weigh on consumer demand.
Shares in major energy producers such as Chevron drifted lower.
Treasury Secretary Paulson, meanwhile, did little to assuage the negative sentiment during an interview on CNBC when he said hard times were likely to continue for a considerable period of time. See Maria Bartiromo's interview with Paulson in video.
Investors also were watching developments in the potential sale of Citigroup's Smith Barney investment brokerage unit to . CNBC reported over the weekend that an announcement is unlikely todayin a deal that could net Citi more than $2.5 billion for surrendering its majority share to Morgan .
Citi's shares were getting pounded as investors worried over the company's capital position and a looming fourth-quarter loss.
Citi was big loser among financials; U.S. Steel led the slide among raw material-based stocks, a sector that has been getting hammered when economic fears are at their peak.