Stocks tumbled after General Motors and Ford reported sharp drops in May sales.
Prior to the news, it was a yo-yo session as a $2 drop in oil prices dragged on energy stocks and concerns lingered about financials. The market popped several times after some good news, including a jump in factory orders, GM's restructuring plan and comments from Federal Reserve Chairman Ben Bernanke, but gains quickly fizzled.
GM reported its sales skidded 30 percent in May, well below what analysts had expected. The breakdown highlighted the stark reality auto makers face: Truck sales plunged 39 percent, more than double the 17-percent drop in car sales.
Rival Ford reported that its sales dropped 19.1 percent in May. Truck sales plunged 29 percent, while car sales were off just 1 percent.
Even Toyota , which has fared better than its U.S. counterparts, showed signs of wear: sales fell 7.9 percent amid a nearly 20-percent drop in Lexus sales. Still, Toyota's breathing down the neck of No. 1 GM: sales of both the Camry and Corolla outsold GM's top-selling F-series truck.
Honda , which has the most fuel-efficient lineup, saw its sales jump more than 11 percent; Civic sales soared more than 28 percent.
Earlier, GM had propped up the Dow amid enthusiasm for the auto maker's restructuring plan that includes the shuttering of four truck plants in North America and the possible sale of its Hummer division as it shifts toward smaller vehicles. But after the release of May sales figures, GM retreated, taking the Dow down triple digits in the process.
"These higher gasoline prices are changing consumer behavior, and rapidly, significantly affecting the U.S. auto industry sales mix," said GM CEO Rick Wagoner. "We at GM don't think this is a spike or a temporary shift. We believe that it is, by and large, permanent."
U.S. light, sweet crude for July delivery dropped $2 a barrelin morning tradingto around $126.
In economic news, factory orders rose 1.1 percent in April, well above the 0.1-percent decline economists had expected. The rise was largely due to stronger demand for nondurable items such as food and clothing; demand for durable goods such as appliances and automobiles, however, waned.
Meanwhile, Bernanke issued a rare warning on the risks a weak dollar poses for inflation. The Fed chairman also hinted that the central bank may end this recent string of rate cuts, saying interest rates are "well-positioned" for an economy grappling with both price pressures and threats to growth.
In other market action Tuesday:
Boeing was the biggest drag on the Dow as the company faces a hefty compensation payment as a result of contamination lawsuit involving its aerospace and defense unit, which it bought from Rockwell International in the mid-1990s.
Lehman Brothers' shares skidded after a source told Reuters that the brokerage's plan to raise $4 billion in capital would only go into effect if absolutely necessary. That follows the stock's 8.1-percent decline Monday after S&P cut its rating on major securities firms including Lehman, Merrill Lynch and Morgan Stanley .
Luxury home builder Toll Brothers said it swung to a loss of 59 cents a share, though that wasn't as bad as the market had feared. The company blamed continued weak demand in most markets amid the housing slump, which is now heading into its second year.
Rival Hovnanian reports earnings after the closing bell; analysts expect a loss of 2.64 a share.
Office-supplies chain Staples raised its all-cash bid for Dutch business products company Corporate Express for the second time to 1.7 billion euros ($2.65 billion), in an attempt to break into the Dutch market.
Richard A. Grasso, former chairman of the New York Stock Exchange, may be able to keep the staggering $185 million award that once made him a symbol of Wall Street greed -- a package awarded to him by the A-list board members at the exchange who eventually fired him.
This Week:
TUESDAY: Auto sales; factory orders; Bernanke speaks; Earnings from Toll Brothers, Hovnanian; Montana, New Mexico primaries
WEDNESDAY: MBA mortgage applications; productivity; ISM services index; crude inventories; Bernanke, Lockhart speaks
THURSDAY: Jobless claims; Fed's Plosser speaks; Earnings from Nat Semi
FRIDAY: Jobs report; wholesale trade; consumer credit; Fed's Evans, Bullard speak
Send comments to cindy.perman@nbcuni.com.