Stocks added to losses amid mixed earnings results, disappointing U.S. economic news, and continuing worries about the euro zone debt crisis.
The Dow Jones Industrial Average fell more than 130 points after sliding on Mondayamid worries about Europe's financial situation, and a downdraft in tech stocks.
Hewlett-Packard led the Dow lower after news it would cut its forecast for the third quarter and the year, despite good first quarter results. The tech firm cited the effects of the Japanese disasters, weak personal computer sales, and reducing operating profit for services.
HP had released its results a day before scheduled after news of a leaked memo by CEO Leo Apotheker, which warned executives of "another tough quarter."
Home Depot, meanwhile, led Dow gainers after beating profit estimates by one penny as investors shrugged of a drop in sales compared with last year, which the home improvement retailer blamed on bad weather.
TheS&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Among key S&P 500 sectors, materials and industrials fell, while utilities gained.
Stocks pared losses for a short while mid-morning as investors came in to "buy the dips," said Joe Saluzzi, co-manager of trading at Themis Trading. But the brief rally didn't hold as losses began accumulating again.
One reason is that various stock indexes are sitting on, or have broken through, their 50-day moving averages. Traders are watching to see whether they break below those levels and hold, which could be a sign of further weakness to come, Saluzzi said.
A moving average refers to the average value of a stock's price over a period of time. Traders use the averages to identify levels of support and resistance for the market.
S&P 500 futures traded below its 50-day moving average of about 1,319 by late morning.
"A lot of traders think (the 50 day-moving average) will hold, but if doesn’t, I see an air pocket that takes you down to the 200-day moving average pretty quickly," Saluzzi said. That would be 1,230, he said.