Stocks skidded Tuesday as the dollar gained against the euro amid a flight to safety. Financials took a beating amid proposals for tighter regulations from the U.S. to Germany.
The Dow Jones Industrial Average accelerated its decline in the final hour of trading, sliding 114.88, or 1.1 percent, to close at 10,510.95, after eking out a 0.1-percent gainon Monday.
The S&P 500 lost 1.4 percent and the Nasdaq shed 1.6 percent. The CBOE volatility index, widely considered the best gauge of fear in the market, was above 33 at the closing bell.
The German government delivered a bit of a shock to the market, announcing plans to ban naked short-sellingof government debt and shares of major corporationsat the country's 10 most important financial institutions.
In the U.S., new rules to curb stock slides like last week's nauseating freefall are expected to go into effect in June and the Senate is likely to hold a final vote on the financial-reform bill in a few days.
Euro-zone ministers scrambled to iron out details of the $1 trillion bailout plan as worries about Europe's ability to implement the plan and stem the debt contagion have rattled markets world-wide.
But the risk trade in stocks shifted back to safety: The dollar rose against the euro to its highest level since about 2006, reversing an earlier slide.
Consumer staples, telecom and energy were the day's best performers, while financials, techs and consumer discretionary were the weakest links.
Most large-cap financials such as Bank of America , Citigroup and Goldman Sachs were down more than 2 percent.
Walmart was the lone gainer on the Dow, up nearly 2 percent,after the discount giant topped earnings its forecasts but said same-store sales fell 1.4 percent as customers have become less focused on low prices started buying more discretionary items. The company also delivered a weak outlook.
But outside of Walmart, most retailers were weak.
Home Depot shares gave up earlier gains. The home-improvement retailer beat earnings expectations and raised its outlookafter strong demand in the spring for gardening supplies and energy-efficient appliances.
The report comes a day after competitor Lowe's also beat estimates but disappointed investors with a weak outlook.
A slew of retailers delivered weak outlooks last week, including Priceline , JC Penney , Kohl's and Nordstrom .
Saks beat earnings expectationsas luxury spending has started to come back, allowing the upscale retailer to offer fewer promotions. However, the company projects slower growth in the current quarter and said it remains cautious due to the uncertain economic outlook.
Hewlett Packard shares fell ahead of earnings from the hardware and software maker, due out after the bell.
Other large-cap tech stocks also declined, including Dell , Microsoft and Google . Market pros attributed the pullback to some profit-taking after a strong rally in the sector on Monday. Plus, a lot of tech companies rely heavily on sales from overseas.
Oil settled below $70 at a seven-month low of $69.41 a barrel, after rising above $72 earlier. Gold skiddedmore than $10 to settle at $1,214.30 an ounce.
Gold has bounded through new highs in the past week, topping out around $1,250. And, while some project the metal, widely viewed as a safe haven amid all the market turbulence, could go as high as $2,000, Dennis Gartman said gold has reached its top.
Investors in gold should "rush to the exits," Gartman said in his daily note to clients. "We wish we'd have been able to send (the letter) to everyone earlier this morning when exiting the trade was wiser, but we've a time table to stand by and we are few hours late in exiting...but exit we must...entirely...upon receipt of this commentary."
In the day's economic news, producer prices fell 0.1 percentin May. Housing starts hit a 1 1/2-year high in April, though building permits, a gauge of future building activity, fell.
Shares of Beazer Homes jumped 5 percent after Citigroup upgraded the stock to "buy" from "hold." Citigroup noted that the homebuilder showed gross margin improvement in its second-quarter results and said other builders were facing potential margin deterioration.
Boeing announced that it would increase production of its narrow-body 737 model to 34 aircraft per month, due to strong demand from airlines as they rebound from the 2008 and 2009 recession.
And United Parcel Service announced strong growth expectations for its Asian business, adding that the volcanic ash cloud in Europe was not hampering its business.
BP shares fell after the energy company doubled the estimate of how much oil it was managing to siphon from the leak in the Gulf of Mexico, as it lifted the total bill for the clean-up to $625 million.
Meanwhile, three Massey directors were re-elected to the mining company's board, despite a threatened proxy battle over safety following the explosion last month that killed 29 workers at one of the firm's mine in West Virginia.
Target and Applied Materials fell ahead of earnings from both companies, due out on Wednesday.
Volume was slightly higher than usual, with about 1.5 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers more than 3 to 1.
Still to Come:
WEDNESDAY: FOMC minutes; Google developers’ conference; weekly mortgage apps; CPI; weekly crude inventories; earnings from Deere, Target, Applied Materials
THURSDAY: Toyota/NHTSA hearing; BOJ monetary policy meeting; weekly jobless claims; leading indicators; Philadelphia Fed survey; earnings from Computer Sciences, Gamestop, Staples, Dell, Gap
FRIDAY: Earnings from Ann Taylor
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