Wall street downfall over Saudi's diplomatic isolation, China's slowdown

The Dow Jones Industrial Average fell to its lowest since July, while the S&P 500 and the Nasdaq retreated to levels last seen in May, continuing a punishing month for U.S. stocks.

Wall Street sank on Tuesday as disappointing forecasts from industrial bellwethers Caterpillar and 3M triggered alarm bells over corporate growth and added to concerns ranging from China's slowdown to Saudi Arabia's diplomatic isolation.

The Dow Jones Industrial Average fell to its lowest since July, while the S&P 500 and the Nasdaq retreated to levels last seen in May, continuing a punishing month for U.S. stocks.

The Nasdaq fell more than 10 percent below its Aug. 29 closing high and if the index closes at that level it would confirm a correction.

Caterpillar tumbled 7.9 percent after the heavy-duty equipment maker maintained its 2018 earnings forecast, while 3M Co slid 6.9 percent after cutting its full-year profit forecast due to currency headwinds.

The forecasts from the two Dow Industrials reignited worries over the impact of rising borrowing costs, wages and tariffs on corporate profits and caused S&P industrial stocks to slide 2.49 percent.

Along with worries over profit growth, concerns over events such as the upcoming U.S mid-term elections and Italy's budget have also sent investors scrambling out of stocks.

"We are in a risk-off environment right now. Markets are worried about politics and earnings," said Sam Stovall, chief investment strategist at CFRA Research in New York.

"Results from Caterpillar and 3M are an additional concern that the trade tensions are indeed pressuring corporate earnings and we possibly have been seeing a peak in earnings growth."

The beaten-down technology sector fell 2.28 percent, in tandem with global peers, over concerns of slowing growth in China and ahead of key earnings.

Amazon, Alphabet, Microsoft and Intel, all due to report this week, were down between 1.7 percent and 3.4 percent. Apple fell 1.7 percent.

Profits of S&P 500 companies are expected to have risen 22.1 percent in the third quarter, slower than the previous two quarters, according to Refinitiv data. Growth is expected to slow to 19.6 percent in the fourth quarter.

At 11:10 a.m. EDT the Dow Jones Industrial Average was down 368.34 points, or 1.45 percent, at 24,949.07, the S&P 500 was down 45.23 points, or 1.64 percent, at 2,710.65 and the Nasdaq Composite was down 151.30 points, or 2.03 percent, at 7,317.33.

The CBOE Volatility Index, Wall Street's fear gauge, rose 3.0 points, its sharpest jump in nearly two weeks.

All 11 major S&P sectors were in the red, with the defensive utilities, real estate and consumer staples indexes posting the smallest losses.

Energy stocks fell 2.93 percent, the most among the sectors, as oil prices fell after Saudi Arabia said it could supply more crude quickly if needed.

Chipmakers, which rely heavily on China for a significant portion of their revenue, led the losses among tech stocks. All members of the Philadelphia semiconductor index were in the red, led by Nvidia's 5.0 percent slide.

However, all earnings report on the day were not disheartening.

McDonald's rose 5.8 percent after it beat estimates for quarterly same-store sales as strong demand in international markets.

Verizon gained 3.6 percent to hit an 18-1/2 year high after beating estimates for profit and net new phone subscribers.

Declining issues outnumbered advancers for a 5.49-to-1 ratio on the NYSE and a 4.80-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 86 new lows, while the Nasdaq recorded two new highs and 344 new lows. 

(With inputs from agencies.)