Stocks continued their slide Monday as the economy and what is expected to be a horrendous earnings season formed a one-two punch to knock out hopes for a January rally.
Major indexes were off their session lows but still reflective of a negative mood on Wall Street, with the Dow Jones Industrial Averagefalling nearly 1.5 percent and the Standard & Poor's 500and the Nasdaqboth down more than 2 percent. After-the-bell earnings from Alcoa added to the gloom, as did predictions of continued economic difficulty from outgoing Treasury Secretary Henry Paulson.
Commodities and financials were taking the biggest hits, but the economic slowdown was sparing few sectors.
"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's shares already lower from an analyst downgrade. The company's earnings badly missed expectations, with Alcoa losing 28 cents a share against expectations of 10 cents.
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.