The Dow stumbled on Monday, roiled by worries about how big a bite the global financial crisis has taken from banks' profits and fallout from a massive investment fraud scheme.
JPMorgan Chase was the biggest drag on the Dow after Merrill Lynch cut the stock to an "underperform" rating and forecast a loss for the bank's fourth quarter.
The downgrade comes ahead of quarterly earnings this week from two other big financial names. Goldman Sachs releases numbers Tuesday and Morgan Stanley does the same Wednesday. Analysts expect Goldman Sachs to report its first quarterly loss since going public in 1999.
Another blow to sentiment stemmed from concern about the financial sector's exposure to potential losses related to investment manager Bernard Madoff, who is accused of masterminding a $50 billion fraud.
Technology shares also pulled the market lower after Goldman Sachs cut its rating on Apple to "neutral" and removed the iPod maker from its conviction buy list, citing falling consumer demand for its products.
Economic data gave investors more reasons for caution. A gauge of manufacturing in New York State hit a record low in December, while homebuilder sentiment remained at record lows for the month.
Now, investors are looking ahead to an interest-rate decision from the Federal Reserve on Tuesday. The U.S. central bank is expected to cut its benchmark fed funds rate to 0.5 percent from 1 percent in hopes of boosting the weak U.S. economy.