U.S. stocks dropped more than 2 percent in late Tuesday trading after a disappointing forecast from Exxon Mobil (XOM.N) and another steep drop in oil prices.
Shares of Exxon (XOM.N) fell 2.3 percent to $74.54 after the oil major reported its smallest quarterly profit in more than a decade and forecast a 25-percent drop in capital spending from 2015 levels. Chevron (CVX.N), which reported a loss on Friday, fell 4.2 percent to $81.70.
Brent oil LCOc1 and U.S. crude CLc1 fell as hopes faded for a deal between OPEC and Russia on output cuts.
"The fact that (Exxon) slashed capex so much is an indication that another oil company is not seeing any improvement" in the near term, said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
The capital spending slump that originated in the hard-hit energy sector appears to be spreading more widely across other U.S. industries.
At 3:11 p.m., the Dow Jones industrial average .DJI was down 334.34 points, or 2.03 percent, to 16,114.84, the S&P 500 .SPX lost 41.26 points, or 2.13 percent, to 1,898.12 and the Nasdaq Composite .IXIC dropped 115.34 points, or 2.5 percent, to 4,505.02.
The Dow Jones transportation average .DJT fell 3.3 percent, hitting a session low in late trading following news of the first U.S. transmission of the Zika virus.
Investors have been concerned about a China-led global economic slowdown, tepid U.S. economic data and the pace of rate hikes by the Federal Reserve. Fourth-quarter S&P 500 earnings are expected to have fallen 4.4 percent from a year earlier, according to Thomson Reuters data.
Yahoo (YHOO.O) and Chipotle (CMG.N) are scheduled to report results after the close of trading.
Bucking the day's trend, Alphabet (GOOGL.O) was up 2 percent at $786.47. The Internet giant's quarterly profit beat estimates and the company surpassed Apple (AAPL.O) as the most valuable U.S. company.
Investors are also keeping an eye on the U.S. election cycle, with Senator Ted Cruz winning the Republican caucus in Iowa on Monday and Democrat Hillary Clinton narrowly edging out Senator Bernie Sanders.
Iowa results created greater uncertainty for investors because there were no clear winners, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
“The bottom line for people who are investing is they prefer a little more certainty than they are seeing right now in either the election or in the energy markets,” he said.
Declining issues outnumbered advancing ones on the NYSE by 2,495 to 561, for a 4.45-to-1 ratio on the downside; on the Nasdaq, 2,267 issues fell and 537 advanced for a 4.22-to-1 ratio favoring decliners.
The S&P 500 posted 15 new 52-week highs and 26 new lows; the Nasdaq recorded 22 new highs and 135 new lows.
(Additional reporting by Tanya Agrawal and Lewis Krauskopf; Editing by Don Sebastian and Nick Zieminski)
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Updated Date: Feb 03, 2016 02:30 AM