Wall Street pulled back Tuesday as investors worried that companies' forecasts signal little easing of the weakness gripping the economy. After logging sharp gains in the previous session, the Dow Jones industrial average fell 2.5 percent, while the Nasdaq composite index lost more than 4 percent following a weak showing by technology names.
Some retreat was to be expected after the Dow shot up 413 points on Monday. But investors poring over a mix of third-quarter earnings reports found enough unsettling outlooks, including forecasts from DuPont Co., Texas Instruments Inc. and Sun Microsystems Inc.
Still, investor anxiety appears to have lessened considerably compared to the previous two weeks when fears about tightening world credit and the health of the economy battered stocks across the globe.
Strains in the credit markets eased further in response to a sweeping series of bailout measures by world governments, including a joint U.S. and European plan to buy stakes in private banks to boost to their lending. Demand for Treasury bills, regarded as the safest assets around, lessened further Tuesday in a sign that credit markets are gradually returning to a healthy state.
But analysts have warned that the market will see a stretch of volatile sessions as Wall Street recovers from this month's huge drop. Even though investors have been expecting third-quarter earnings, and even fourth-quarter forecasts, to reflect the damage from the financial system's problems, the reality of companies' reports have been unnerving.
"It's just this back-and-filling stuff. It's driven by earnings, yes, but also emotion," said Harry Clark, chief executive of Clark Capital Management in Philadelphia. "It's going to be this tug-of-war for a couple weeks at least."
The technology-focused Nasdaq saw steeper declines than the other major indexes after server and software company Sun Microsystems warned it would post a big loss for its fiscal first quarter and book a write-down. Texas Instruments shares fell to their lowest level in more than five years after the chip maker turned in disappointing earnings and issued a lackluster forecast amid slowing orders.
According to preliminary calculations, the Dow fell 231.77, or 2.50 percent, to 9,033.66.
Broader indexes also declined. The Standard & Poor's 500 index fell 30.35, or 3.08 percent, to 955.05. The Nasdaq composite index shed 73.35, or 4.14 percent, to 1,696.68.
Declining issues outpaced advancers by about 2 to 1 on the New York Stock Exchange, where volume came to a light 1.16 billion shares.