The International Monetary Fund cut its global growth forecast to a 3.3 percent for 2012, making it the slowest year of growth since 2009. It warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump, and forecast China's growth would weaken to 7.8 percent this year.
European shares were flat as German Chancellor Angela Merkel makes her first official visit to Greece, amid thousands of protestors, since the debt crisis erupted. The Greek government is still in discussion with the troika (the European Commission, European Central Bank and the International Monetary Fund) regarding austerity cuts it must make to secure the next tranche of its bailout. The two sides have so far failed to reach an agreement.
Apple edged lower after Nomura initiated the iPhone maker with a "neutral" rating and a price target of $710. Separately, Credit Suisse said it sees a strong second half for Apple and reiterated its "outperform" rating.
Third-quarter earnings season kicks off with results from Dow component Alcoa after the closing bell. Analysts expect the aluminum producer to post a break-even quarter, down from reporting earnings of 15 cents a share a year ago, according to data from Thomson Reuters. Yum Brands is also scheduled to post earnings.
Recent earnings warnings from large multinationals such as FedEx, Caterpillar and Hewlett-Packard have made investors cautious about corporate profits. (Read More: US Braces for Worst Earnings Season Since 2009)
Edwards Lifesciences plunged after the medical-device maker slashed its third-quarter revenue forecast.
Spectrum Brands Holdings said it will buy a unit of Stanley Black & Decker that makes door locks and bath fixtures in a deal worth $1.4 billion.
RadioShack soared after the consumer-electronics retailer was upgraded to "buy" from "underperform" at Bank of America Merrill Lynch. Meanwhile, Netflix slumped after BofA downgraded the online movie streaming company to "underperform" from "buy."
On the economic front, small business sentiment dipped 0.1 point to 92.8 in September, weakening for the fourth time in five monthsas fewer owners expected to add staff and make capital investments, according to the National Federation of Independent Business.
The Treasury is set to auction $32 billion in 3-year notes, with the results available shortly after 1pm ET. The bond market was closed on Monday in observance of the Columbus Day holiday.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: 3-yr note auction, FedEx investors mtg, P&G shareholers mtg; Earnings from Alcoa, Yum Brands
WEDNESDAY: Weekly mortgage apps, wholesale trade, 10-yr note auction, Beige Book, Treasury budget, Wal-Mart investors mtg; Earnings from Costco
THURSDAY: International trade, jobless claims, import/export prices, oil inventories, 30-yr bond auction
FRIDAY: PPI, consumer sentiment, GM resumes Volt production; Earnings from JPMorgan, Wells Fargo
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