After an early-day rebound, U.S. stocks closed in the red Tuesday, with the Dow Jones Industrial Average shedding more than 200 points. Traders began the day optimistically after China cut its benchmark interest rate for the fifth time in nine months in an attempt to boost slowing economic growth.
The Standard & Poor's 500 index lost more than 1 percent of its value after Monday's sell-off pushed it into negative territory for the year.
The Dow (INDEXDJX:.DJI) lost 204.91 points, or 1.29 percent, to close at 15,666.44. The S&P 500 index (INDEXSP:.INX) dropped 25.59 points, or 1.35 percent, to 1,867.62. And the Nasdaq composite (INDEXNASDAQ:.IXIC) shed 19.76 points, or 0.44 percent, to 4,506.49
Global markets rallied higher after the Chinese central bank announced plans to cut its one-year lending rate to 4.6 percent, a move the People's Bank of China said would provide long-term liquidity and help support the economy. The move came after China’s benchmark Shanghai composite index slid further Tuesday, losing 7.6 percent to close below the psychological 3,000 mark.
In recent years, late summer has seen bouts of stock market volatility. It is quite normal for stock prices to decline at some point almost every year, said Burt White, chief investment officer for LPL Financial.
"At times like these we need to remind ourselves that market downturns are part of investing. The length of the current bull market, the lack of notable pullbacks, and the length of time without a correction may have increased investor sensitivity to pullbacks," White said in a note.
All 10 sectors in the S&P 500 closed in the red, led by a more than 3 percent drop in utilities stocks. The telecommunications sector gained lost more than 2 percent.
Only two of the 30 stocks in the Dow closed higher: iPhone maker Apple Inc. (NASDAQ:AAPL), which gained a slight 0.60 percent to $103.74, and Walt Disney Co. (NYSE:DIS), which rose 0.56 percent to $95.89.