Stocks closed sharply lower across the board Tuesday, with the Dow logging its worst one-day drop since June, pressured by several disappointing quarterly results and amid renewed fears over Spain's weak economy.
"The revenue line is getting hurt the worst—it shows how nimble and savvy companies are, but that's not going to continue forever," Art Cashin, director of floor operations at UBS Financial Services, said of the latest quarterly results. "We've already broken through an important level at 1,418 to 1,421, the next level is 1,408 to 1,411 and then we challenge 1,400 itself."
Major U.S. Indexes
The Dow Jones Industrial Average tumbled 243.36 points, or 1.82 percent, to end at 13,102.53. Most Dow components closed in negative territory, led by DuPont.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared more than 10 percent to end near 19.
All key S&P sectors closed in the red, dragged by materials and energy.
Meanwhile, Apple introduced a thinner and lighter version of its 13-inch Macbook Pro and a smaller version of its iPad called iPad Mini. But shares dropped near session lows after the company announced the 16 GB version of the mini will be priced at $329, higher than expectations.
"Whether it's guidance or revenue growth, there's been much disappointment over the earnings season," said Art Hogan, managing director at Lazard Capital Markets. "The difference today is that we're seeing more pressure from Europe, which has been dormant…add to that the ongoing 'fiscal cliff' worry, and we have a combination of things pushing us lower."
So far, nearly 30 percent of S&P 500 companies have posted results, with only 37 percent of companies topping revenue estimates. The average company is missing expectations by 2 percent. Meanwhile, 57 percent of the earnings reports have come in above forecasts.
If all remaining companies report earnings in line with estimates, earnings will be down 2.5 percent from last year's third quarter.
RadioShack badly missed estimates due to weak margins in its smartphone business. Still, shares finished higher, recovering from a weak open.
Facebook is scheduled to post results after the close. Analysts expect the social-networking giant to post earnings of 11 cents a share on revenue of $1.23 billion.
European shares closed sharply lower after a report that showed Spain's economy contracted at a 1.7 percent rate in the third quarter, faster than the second quarter's 1.3 percent contraction. In addition, Standard & Poor's downgraded five regions in Spain on Monday afternoon.
Monster Beverage plunged for a second day after the FDA said it is investigating reports of several people dying after consuming its energy drinks. In addition, Goldman Sachs removed the company from its "conviction buy" list.
The Federal Open Market Committee begins its two-day meeting, with the announcement due Wednesday afternoon. The Fed is expected to hold back on further stimulus measures in order to assess the impact of its third round of quantitative easing, launched last month. (Read More: Bernanke Probably Won't Stand for Third Term at Fed)
Treasury prices gained after the government auctioned $35 billion in 2-year notes at high yield of 0.295 percent and bid-to-cover of 4.02. The government is scheduled to auction 5-year and 7-year notes on Wednesday and Thursday, respectively.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
WEDNESDAY: Weekly mortgage apps, new home sales, FHFA home price index, oil inventories, 5-yr note auction, FOMC mtg announcement; Earnings from AT&T, Boeing, Bristol-Myers, Delta, Eli Lilly, Akamai, Symantec, Zynga
THURSDAY: Durable goods orders, jobless claims, Chicago Fed nat'l activity index, pending home sales, Kansas City Fed survey; Earnings from Altria, AstraZeneca, ConocoPhillips, P&G, Aetna, AutoNation, Credit Suisse, Dow Chemical, Pulte, Sprint, United Continental, Apple, Amazon.com, Coinstar
FRIDAY: GDP, consumer sentiment, Windows 8 released; Earnings from Comcast, Merck
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