Weakness in semiconductor stocks, tied to worries about the US economy and fourth-quarter holiday spending, helped push the technology-laced Nasdaq Composite Index lower. The three major US stock indexes dropped over 1 percent, erasing most of the gains from Monday's rally.
The biggest drag on the blue chip Dow average was GM, down 6.8 percent at $27.19 on the New York Stock Exchange. The world's largest automaker said it had been subpoenaed by the US Securities and Exchange Commission as part of an investigation into its accounting practices. The news also drove GM's debt down sharply.
A GM spokeswoman firmly denied any plans to consider a bankruptcy filing.
The Dow Jones industrial average fell 115.03 points, or 1.11 percent, to end at 10,229.95. The Standard & Poor's 500 Index dropped 12.48 points, or 1.05 percent, to finish at 1,178.90. The technology-laced Nasdaq Composite Indexslid 36.24 points, or 1.73 percent, to close at 2,063.81. After the closing bell, shares of Microsoft Corp slipped 2.3 percent in after-hours trading after the world's largest software company posted its fiscal first-quarter results, with revenue edging a touch below Wall Street estimates. The stock fell to $24.27 on the Inet electronic brokerage system. It closed at $24.85 on Nasdaq.
During the regular session, shares of Goodrich Corp, the leading US aircraft brake and landing gear manufacturer, tumbled 15 percent to $36.74. Earlier, the stock sank 19 percent to a session low at $34.75 on the New York Stock Exchange in its biggest single-day percentage slide in four years. Goodrich warned next year's profit would be held back by significant costs. The semiconductor sector fell as investors worried about lower holiday spending, which would hurt technology companies in the fourth quarter, said Angel Mata, managing director of listed equity trading at Legg Mason Wood Walker.
The Philadelphia Stock Exchange index of semiconductors was down 2.7 percent. Shares of Intel Corp, part of the index, slipped 1 percent to $22.84 on Nasdaq.
The Commerce Department's durable goods report showed a 1.2 percent decline in orders for non-defence capital goods, excluding aircraft, which economists view as an indicator of future business spending. Sales of new homes rose more slowly than expected last month, while house prices dropped and the number of new homes on the market hit a record, the Commerce Department said. Average rates for US 30-year mortgages also rose for the seventh straight week, hitting 6.15 percent last week, mortgage finance company Freddie Mac said. The Dow Jones index of home builders' shares fell 3.6 percent. The index includes KB Homes, one of the largest US home builders, down 5 percent at $61.37.
Oil company shares, including Exxon Mobil Corp and Chevron Corp, fell after Senate Majority Leader Bill Frist ordered a US Senate hearing with testimony from major oil company executives on why energy prices are so high.
Exxon Mobil fell 1.1 percent, or 60 cents, to $55.62. Chevron lost 2 percent, or $1.16, to $56.50, both on the NYSE.
US December crude futures rose 43 cents to settle at $61.09 a barrel.
Shares of Liz Claiborne Inc, the maker of Juicy Couture and other women's clothing brands, fell almost 10 percent, or $3.73, to $34.56 on the NYSE. It reported a profit, but cut forecasts for the fourth-quarter and next year, saying steep energy prices and rising interest rates had hurt consumer confidence.