A recent selloff on Wall Street deepened on Tuesday as U.S. crude prices fell and an "in line" report showing slower growth in China failed to prop up an early rally.
Falling U.S. crude prices pulled down materials stocks as well as the S&P energy sector, which slumped 2.91 percent.
Oil at 12-year lows is stoking fears on Wall Street of deeper losses for energy companies and the potential that some may fail to pay their debts. That has created carnage in oil stocks, helping push the S&P 500 down 8 percent since the start of the year.
U.S. stocks had opened higher after a report showed China's growth in 2015 was the slowest in 25 years but in line with expectations. The report raised hopes that Beijing would cushion the slowdown with more stimulus policies, but gains in U.S. markets were short-lived and the S&P moved lower in afternoon trade.
"You have a tremendous amount of fear and uncertainty in the markets and we'll need to see more than one good economic data point to overcome that,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
In a sign that there more misery may lay ahead, Tuesday's failed rally follows about a dozen similar short-lived gains so far this year. Failed rallies often characterize the early stages of a bear market as some investors buy on dips, but not enough of them to sustain a move up in share prices.
At 2:55 pm, the Dow Jones industrial average was down 0.29 percent at 15,941.38 point and the S&P 500 had lost 0.61 percent to 1,868.95.
The Nasdaq Composite dropped 1.03 percent to 4,442.15, hurt most by a 1.3 percent decline in Apple.
Exxon Mobil dropped 2.82 percent and was the largest drag on the S&P 500. Chevron fell 2.78 percent.
With the fourth-quarter season shifting into gear, S&P 500 earnings on average are expected to fall 4.4 percent, dragged down by the energy sector.
Bank of America fell 2.7 percent despite beating fourth-quarter profit expectations, after it expressed concerns about weak oil prices.
UnitedHealth rose 2.5 percent, limiting losses on the Dow after the health insurer reported a 30 percent rise in quarterly revenue.
Tiffany lost 6.5 percent after the upscale jeweller said holiday season sales fell 6 percent.
IBM and Netflix are scheduled to report results after the close.
Declining issues outnumbered advancing ones on the NYSE by 2,251 to 844. On the Nasdaq, 2,087 issues fell and 746 rose.
The S&P 500 index showed one new 52-week high and 84 new lows, while the Nasdaq recorded six new highs and 365 new lows.
(Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski)
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