Global equities and the euro fell on Tuesday on concerns over the U.S. earnings outlook and a stark warning from the IMF about global growth, while oil rose on escalating tensions in the Middle East.
Government debt prices rose in a bid for safety as anxiety among investors picked up on the International Monetary Fund's gloomier picture of the global economy.
The uncertain outlook for Spain and Greece added to concerns. Tens of thousands of angry Greek protesters filled the streets of Athens to greet German Chancellor Angela Merkel, who offered sympathy but no promise of further aid on her first visit since the euro crisis erupted three years ago.
Spanish bond yields rose after euro zone finance ministers said o n M onday that Madrid did not need a bailout yet, adding to uncertainty about when Spain will ask for aid, widely seen as inevitable.
Equity investors were also in a cautious mood as they awaited the kick-off of the U.S. quarterly earnings season, due to start in earnest after the market close with the release of results by aluminum maker Alcoa.
"The tone of the market still feels greatly uncertain as we head into earnings season in the United States, and indeed the market is now focusing its attention that way as it seeks out bad news wherever it can find it," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut.
Disappointing results could weigh on equity prices and the euro. Stocks and the euro move together 90 percent of the time, Reuters data showed, with the euro rising as stocks gain.
The Dow Jones industrial average was down 85.23 points, or 0.63 percent, at 13,498.42. The Standard & Poor's 500 Index was down 11.30 points, or 0.78 percent, at 1,444.58. The Nasdaq Composite Index was down 42.12 points, or 1.35 percent, at 3,070.23.
In Europe, the FTSEurofirst 300 index of top company shares fell 0.5 percent to close provisionally at 1,095.32, while MSCI's all-country world equity index slid 0.7 percent.
The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 1.7028 percent.
The euro fell 0.7 percent to $1.2882. The U.S. Dollar Index rose 0.54 percent at 79.969.
Spanish bond yields rose after investors trimmed expectations of a swift solution to Madrid's debt problems as politicians in Spain resisted seeking a bailout.
Yields on Spanish 10-year government bonds were 10 basis points higher on the day at 5.83 percent, but well below the July peak of 7.8 percent.
Concern about Greece also resurfaced after European Central Bank chief Mario Draghi told the European Parliament Committee that Greece has made progress on reforming its economy but has more work to do.
"Some things have improved in the last to two or three months, but I think the road ahead is still long and it's uphill," Draghi said.
The IMF, one of Greece's main lenders, said in a report that Athens would miss the five-year debt reduction target that is a condition for the country's 130 billion euro bailout.
The IMF outlook "was adding to the downbeat sentiment. It was a confirmation of slow growth globally," said Gennadiy Goldberg, an interest rate strategist with TD Securities in New York. "That's why we are setting back into this trading range."
The threat of supply disruption in a tense Middle East countered concerns about slower growth and resulting sluggish demand for oil.
NATO said it had drawn up plans to defend Turkey if necessary against any further spillover of violence from Syria, where rebels and government forces are fighting for control.
Brent futures rose $2.54 to $114.36 a barrel. U.S. crude climbed $2.89 to $92.22, also rebounding after two consecutive sessions of declines.
Copper prices steadied on expectations for further pro-growth policies from top consumer China, but later slipped as risk assets sold off.
Benchmark copper on the London Metal Exchange was down 0.2 percent at $8,165 a tonne.
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