Stocks slipped, led by the riskiest market segments, amid further evidence the economy is slowing down, and a weak earnings forecast from Hewlett-Packard.
The Dow Jones Industrial Average fell more than 65 points after sliding in the previous sessionamid worries over Europe's financial situation and a downdraft in tech stocks.
Hewlett-Packard led the blue-chip index lower after news the tech giant said it would cut its forecast for the third quarter and the year—despite good first quarter results—citing the effects of the Japanese disasters, weak personal computer sales and reducing operating profit for services. In addition, at least four brokerages downgraded their ratings on the company.
HP's results were released a day before scheduled after news of a leaked memo by CEO Leo Apotheker, which warned executives of "another tough quarter."
Meanwhile, Home Depot led Dow gainers after the home-improvement retailer beat profit estimates by one penny as investors shrugged off a drop in sales compared with last year. Home Depot blamed bad weather for the sales slump.
TheS&P 500 and the tech-heavy Nasdaq also declined. Stocks have already had as many down days in May as in April. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Among key S&P 500 sectors, industrials and materials fell, while defensive sectors such as utilities gained.
Although it feels a lot worse, the S&P 500 is only down 3.5 percent from its peak in late April, said Oliver Pursche, president of Gary Goldberg Financial Services
"There’s a lot more anxiety and a feeling that things are worse than they actually are," Pursche said.
Also, Pursche noted, the declines have been on declining volume. "From a purely technical perpspective, that’s not overly concerning," he said.
Nonetheless, there are troubling signs that warrant investor concern. Recent economic reports have pointed to troubles in the economy, Pursche said. Also, Dominque Strauss-Kahn's arrest on sexual assault charges present an "unwanted distraction" that is "certainly not going to speed along the debt troubles in Europe," he said.
On top of that, economies in Asia are slowing down, and the second phase of the Federal Reserve's bond buying program, known as quantitative easing, ends in about six weeks.
"There is certainly some anxiety over what happens next," Pursche said.
In daily market action, traders were keeping a close eye on the 50-day moving averages of the major indicies. A moving average refers to the average value of a stock's price over a period of time. Traders use the averages to identify levels of support and resistance for the market.
S&P 500 futures, for instance, traded below its 50-day moving average of about 1,319 at late morning, but later moved higher, which traders view as a bullish sign.
"A lot of traders think (the 50 day-moving average) will hold, but if doesn’t, I see an air pocket that takes you down to the 200-day moving average pretty quickly," said Joe Saluzzi, co-manager of trading at Themis Trading. That would be 1,230, Saluzzi said.