Wall Street stocks fell on Tuesday after a meeting of the heads of France and Germany failed to quell market fears about euro zone leaders' ability to contain the region's sovereign debt woes.
German Chancellor Angela Merkel and French President Nicolas Sarkozy on Tuesday detailed plans for closer euro zone integration, but that did not include boosting the size of the euro zone's rescue fund or beginning sales of euro bonds.
Stocks initially pared losses on the comments but quickly reversed course to trade sharply lower. 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 was down 2.1 percent.
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.
The European leaders also said the euro zone could impose a tax on financial transactions, hitting shares of exchange operators. Shares of NYSE Euronext fell 9.7 percent to $26.16, making it the worst performer in the S&P 500.
The Dow Jones industrial average was down 82.08 points, or 0.71 percent, at 11,400.82. The Standard & Poor's 500 Index was down 13.07 points, or 1.09 percent, at 1,191.42. The Nasdaq Composite Index was down 37.01 points, or 1.45 percent, at 2,518.19.
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.
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.
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.
(Reporting by Ashley Lau; Editing by Kenneth Barry)