US markets drop on earnings caution and lowered global economic outlook

The US markets fell sharply on Tuesday to close near session’s low, extending losses as investors braced for earnings and worries resurfaced on the lowered global economic outlook from the International Monetary Fund.  The IMF stated that, the prospects of recession in Europe are alarmingly high and economies around world could struggle three years after the financial markets meltdown if the US fails to resolve its fiscal cliff. The second largest economy, China could also suffer a large decline in growth. After market hours, the Dow component and aluminum producer Alcoa Inc. swung to a third-quarter loss from the year-earlier period, dragged down by legal charges. Besides, Intel Corporation fell, hitting a new 52-week low, as the chip giant’s stock led a tech sector retreat.  Intel took a hit from Bernstein Research, which cut its rating on the stock to underperform from market perform, citing risks of lower average selling prices in 2013 amid worries about a slowing PC market.

In Europe, German Chancellor Angela Merkel visited Athens, where she was greeted by mass demonstrations as she reiterated her stance that she wants Greece to remain in the euro. In Luxembourg, European finance ministers gathered for a second day after pronouncing, on Monday, the European Stability Mechanism, or permanent rescue fund, operational. Besides, the ECB President Draghi estimated weak economic activity in the euro zone in a presentation to the European Parliament and suggested that there is no alternative to austerity measures in the Southern European region. Separately, German manufacturing turnover remained unchanged and French deficit widened in August. On the other hand, Greek inflation eased in September.

The Dow Jones Industrial Average lost 110.12 points, or 0.81 percent, to close at 13,473.50, the S&P 500 finished down by 14.40 points, or 0.99 percent at 1441.48, while the Nasdaq ended lower by 47.33 points, or 1.52 percent to settle at 3065.02.

Indian ADRs closed in red on Tuesday, Dr. Reddy’s Lab was down 0.74%, Infosys was down by 0.43%, Tata Motors was down by 0.40%, ICICI Bank was down by 0.37% and HDFC Bank was down 0.27%.