Stocks tumbled on Tuesday on jitters over what is expected to be another bleak earnings season and following news General Motors was said to be in intense preparations for a possible bankruptcy filing.
After the worst fourth-quarter earnings season on record, investors are expecting another weak round of results, starting with aluminum producer Alcoa Inc
Earnings for S&P 500 companies are expected to fall by 36.7 percent, according to Thomson Reuters data.
I don't think it's going to be any surprise to people that the first-quarter earnings are going to be lousy, said Craig Hester, CEO of Hester Capital Management in Austin, Texas. The key is going be what companies say about future.
Shares in General Motors Corp
The Dow Jones industrial average <.DJI> fell 201.59 points, or 2.53 percent, to 7,774.26. The Standard & Poor's 500 Index <.SPX> lost 19.73 points, or 2.36 percent, to 815.75. The Nasdaq Composite Index <.IXIC> gave up 43.71 points, or 2.72 percent, at 1,563.00.
Investors are fearful of the spill-over effects a bankruptcy in the auto sector could have on the rest of the economy and other companies in the industry.
Here's one of the old icons of American industry that would find itself in bankruptcy, said Hester.
One of the consequences of that is the multiplier effect in reverse on the economy and all the industries that that would impact, particularly the suppliers.
Shares of GM fell 13.2 pct to $1.97, while auto suppliers such as Lear Corp
Also weighing on sentiment was a report that the International Monetary Fund was set to forecast toxic assets on the balance sheets of financial corporations could reach $4 trillion.
The KBW Bank <.BKX> index shed 2.2 percent, while JPMorgan & Chase
Among laggards on the Nasdaq, big-cap tech companies fell, including Apple
Tuesday was the second day of declines after stocks rallied off 12-year lows in the last month. Despite the declines, the S&P 500 is up more than 20 percent since hitting a bear market closing low in early March, on hopes the economic slump is moderating and banks are stabilizing.
(Editing by Theodore d'Afflisio)