France's President Nicolas Sarkozy welcomes German Chancellor Angela Merkel as she arrives for a meeting at the Elysee Palace in Paris
German Chancellor Angela Merkel and French President Nicolas Sarkozy are expected to hold emergency talks with Greece's Prime Minister George Papandreou on Thursday ahead of the G20 summit in Cannes. Reuters

U.S. stocks fell on Tuesday after three days of gains when a meeting between the heads of France and Germany failed to quell fears about euro zone leaders' ability to contain the region's sovereign debt woes.

Efforts to stem the spreading European debt crisis have so far been ineffective, a major reason for the equity market's declines in recent weeks. Stocks were unable to rally on Tuesday despite positive U.S. earnings and Fitch Ratings' decision to keep the AAA credit rating for the United States.

German Chancellor Angela Merkel and French President Nicolas Sarkozy detailed plans for closer euro zone integration but they did not include boosting the size of the euro zone's rescue fund or sales of euro bonds. For details, see [ID:nB4E7HT04B]

"The market wanted to see at least some forward movement, something concrete coming out of the meeting that would've been supportive to what's been dragging the market lower," said Marc Pado, U.S. market strategist at Cantor Fitzgerald in San Francisco.

Shares of financials, seen as vulnerable to a European fiscal crisis, added to their decline and were the worst-performing sector in the S&P 500. The S&P financial index .GSPF was down 1.9 percent.

Merkel and Sarkozy said they would propose a tax on financial transactions, which hurt shares of exchange operators. Shares of NYSE Euronext (NYX.N) fell 8.4 percent to $26.54, making it the worst performer in the S&P 500.

Shares of retailers Wal-Mart Stores Inc (WMT.N) and Home Depot Inc (HD.N) both rose after the industry bellwethers exceeded analysts' expectations for quarterly numbers.

Dell Inc's shares dropped 4.9 percent in after-hours trading after the company reported revenue slightly below analysts' expectations and said sales in the present quarter would be flat.

Euro zone worries have weighed heavily on markets, most recently with last week's concerns about the solvency of French banks and the continued uncertainty over the European Central Bank's ability to control sovereign bond yields.

The Dow Jones industrial average .DJI dropped 76.97 points, or 0.67 percent, at 11,405.93, while the Standard & Poor's 500 Index .SPX declined 11.73 points, or 0.97 percent, at 1,192.76, and the Nasdaq Composite Index .IXIC fell 31.75 points, or 1.24 percent, at 2,523.45.

Worries about the euro-zone troubles and a weakening U.S. economy have pushed U.S. stocks into correction territory after the S&P 500's closing high on April 29.

Data showed Germany's gross domestic product expanded just 0.1 percent from April to June versus the previous quarter, missing forecasts and knocking regional growth figures below expectations. [ID:nN1E77F0FD] [ID:nL5E7JG0N0]

"We have France out with no growth yesterday and Germany out with no growth today. It broadens a picture that global economies have experienced a simultaneous pause," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Fitch confirmed the United States' top-notch credit rating less than two weeks after Standard & Poor's downgraded the United States to AA-plus.

Wal-Mart shares advanced 3.9 percent to $51.92 after the company said U.S. same-store sales turned positive in July. Home Depot shares gained 5.2 percent to $33.12 after the company raised its fiscal-year profit forecast for the second time in three months.

About 8.2 billion shares were traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, roughly in line with last year's daily average of 8.47 billion. About three stocks fell for every advancer on the New York Stock Exchange and about four shares declined for every advancing stock on the Nasdaq.