By Yashaswini Swamynathan
U.S. stocks tumbled on Tuesday, with the S&P 500 and the Nasdaq on track for their worst day in one month, after Alcoa kicked off the earnings season on a dour note.Alcoa's shares fell nearly 11 percent, their worst day in five years after the aluminum producer reported quarterly revenue and profit that fell short of the market's expectation. All major S&P 500 indexes were lower, with healthcare dropping to its lowest level since the post-Brexit selloff in late June.Markets are likely to be more volatile as the earnings season turns the spotlight on valuations, while a tight race for the White House and a potential U.S. interest rate hike by the year-end add to the jitters. The CBOE Market Volatility index, also called Wall Street's "fear gauge", rose nearly 15 percent to a two-week high of 15.3."You are coming up against very low expectations, which means the bar is already low. If you can't match those expectations, then investors are going to quickly move to the exit," said Adam Sarhan, chief executive at Sarhan Capital.
Overall earnings of the S&P 500 companies are expected to fall 0.7 percent in the third quarter, the fifth straight quarter of decline, according to Thomson Reuters data. Materials took a hit after the dollar surged 0.64 percent, marking the second straight day of gains. Investors have priced in an 80 percent chance of a rate hike in December, the CME Group's FedWatch tool showed. At 12:32 p.m. ET (1632 GMT), the Dow Jones Industrial Average was down 164.6 points, or 0.9 percent, at 18,164.44.
The S&P 500 was down 21.61 points, or 1 percent, at 2,142.05 and the Nasdaq Composite was down 67.63 points, or 1.27 percent, at 5,261.05.Diagnostic test maker Illumina lost a quarter of its value after it cut third-quarter revenue forecast for the second time in a row. St. Jude dropped 3.1 percent in heavy premarket trading after the company warned that some of its implanted heart devices are at risk of premature battery depletion, a condition it said had been linked to two patient deaths.
Rent-A-Center dropped 29.4 percent after the company estimated third-quarter earnings to fall below analysts' expectations. However, Apple touched a 10-month high after rival Samsung said it would scrap its Galaxy Note 7 smartphones due to safety concerns. Declining issues outnumbered advancing ones on the NYSE by 2,528 to 397. On the Nasdaq, 2,228 issues fell and 479 advanced.The S&P 500 index showed four new 52-week highs and four new lows, while the Nasdaq recorded 37 new highs and 47 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)
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Updated Date: Oct 12, 2016 00:15 AM