NEW YORK - The prospects of weakening global growth weighed on the stock market Tuesday.
U.S. growth may be strengthening, but the outlook elsewhere is far less encouraging. On Tuesday the International Monetary Fund trimmed its forecast for global economic growth. A surprisingly weak report on industrial production in Germany, Europe's biggest economy, added to the concerns.
Industrial companies, whose fortunes are closely tied those of the global economy, led the sell-off. Government bonds rallied as investors snapped up safe assets, pushing the yield on the benchmark 10-year Treasury note close to its lowest level of the year.
After a weak September, the slump in stocks is showing no signs of abating in October. The Standard & Poor's 500 stock index has now dropped almost 4 percent since closing at a record Sept. 18.
"Investors have become a bit more cautious about earnings and about the pace of global growth," said Kate Warne, a principal at Edward Jones, an investment firm. "That reassessment is leading to a bit more caution on stocks."
The Standard & Poor's 500 index fell 29.72 points, or 1.5 percent, to end at 1,935.10. The index closed at a record 2,011.36 on Sept. 18.
The Dow Jones industrial average dropped 272.52 points, or 1.6 percent, to finish at 16,719.39. The Nasdaq composite fell 69.60 points, or 1.6 percent, to close at 4,385.20.
General Motors (GM) was among the biggest decliners in the S&P 500 after analysts at Morgan Stanley (MS) cut their price target for the stock. The analysts predict that the automaker's earnings will suffer as it invests heavily in production. GM's stock dropped $1.98, or 5.9 percent, to $31.77.
SodaStream (SODA) was another big loser. The company said it isn't winning over enough new customers in the U.S. and reported preliminary sales results that fell short of Wall Street's expectations. The stock tumbled $6.05, or 21.9 percent, to $21.52.
Stocks started the day lower after a report showed that German industrial output fell 4 percent in August, far more than expected. The slump follows other disappointing economic reports and suggests Europe's economy will not recover as strongly as hoped in the third quarter.
The prospect of slowing growth in other parts of the world weighing on corporate profits was behind the sell-off Tuesday, said Jack Ablin, chief investment officer at BMO Private Bank. Companies will soon start reporting earnings for the third quarter, and investors will be watching out for their forecasts for the rest of the year.
"Investors are starting to get worried that Europe is going to dent growth," Ablin said. "It's an open invitation for managements to lower their guidance."
The IMF trimmed its outlook for global economic growth this year and next, mostly because of weaker expansions in Japan, Latin America and Europe. The IMF said Tuesday that the global economy will grow 3.3 percent this year, slightly below what it forecast in July.
Many analysts say, though, that the investors have no need to panic and should focus on the signs that the U.S. economy is strengthening.
"Investors should remain comfortable at these levels and not be panicked by the recent volatility," said Sean Lynch, a managing director of global equity research and strategy for Wells Fargo Private Bank.
The indications of slower growth in Europe and elsewhere outside of the U.S. also weighed on oil prices.
Benchmark U.S. crude fell $1.49 to close at $88.85 a barrel on the New York Mercantile Exchange, its lowest level since April of 2013. Brent crude, a benchmark for international oil used by many U.S. refineries, fell 68 cents to close at $92.11 on the ICE Futures exchange in London.
Sliding oil prices are also hitting energy stocks, and the sector extended its losses on Tuesday. Energy companies in the S&P 500 have dropped 9.4 percent in the past month.
U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.34 percent from 2.42 percent on Monday. That's close to its lowest level of the year.
In metals trading, gold rose $5.10, or 0.4 percent, to $1,212.40 an ounce. Silver edged up 2 cents, or 0.1 percent, to $17.24 an ounce. Copper was little changed at $3.04 per pound.
On Wednesday, the U.S. Federal Reserve is due to release notes on its latest meeting on Wednesday. Investors will be looking for signs of when the Fed might raise interest rates. The first rate increase is not expected until mid-2015.
Among other stocks making big moves on Tuesday:
-- Keurig Green Mountain (GMCR) jumped after analysts at Goldman Sachs initiated their coverage of the stock with a "buy" rating, predicting that the company's sales and earnings growth are poised to accelerate. Keurig's stock jumped $6.50, or 4.9 percent, to $139.75.
-- AGCO (AGCO), an agricultural equipment maker, cut its third-quarter and full-year earnings forecasts, sayings its results are expected to be hurt by weaker sales in all regions, lower production and the impact of shifting exchange rates. The company will report its earnings on Oct. 28. AGCO's stock dropped $4.97, or 10.6 percent, $42.13.