Stocks slumped Tuesday on a disappointing opening to earnings season and a move by China to restrain its economy.
The Dow Jones industrial average lost more than 35 points.
The market opened lower after the Chinese central bank unexpectedly told the country's banks to set aside greater reserves in an effort to keep inflation under control and to prevent bubbles from developing in real estate and other markets.
Beijing's action, by reducing the amount of money that Chinese banks can lend, is likely to rein in growth of the country's economy, which has rebounded quickly from the global recession. But that could limit other countries' exports to China, especially of raw materials.
As a result, commodity prices slid. The price of copper sank 2.7%. And on Wall Street, shares of raw-material producers led stocks down.
Also hurting U.S. stocks was a report late Monday from Alcoa of lower-than-expected fourth-quarter earnings because of rising energy costs. Shares of the aluminum giant tumbled 11%. Among other industrial stocks, Caterpillar was down 2.9%.
The Dow fell 36.73 points, or 0.3%, to 10,627.26, while the Standard & Poor's 500 index dropped 10.76 points, or 0.9%, to 1,136.22.
The Nasdaq composite index sank 30.10 points, or 1.3%, to 2,282.31. The Russell 2,000 index of small-company stocks also lost 1.3%.
Five stocks fell for every two that rose on the New York Stock Exchange.
It was the first down day of the year for the S&P 500, which had risen 2.8% in the first six trading sessions of January. (Tuesday was the Dow's second down day.)
"You have yourself the first broad-based pullback of 2010," said Todd Clark, director of trading at Nollenberger Capital Partners, an investment firm in San Francisco.
Banking stocks lost ground after Obama administration officials indicated that they would seek to tax the profits that the banks have recorded in the last year as they have recovered from the financial crisis. Banks are among the major companies that are scheduled to begin releasing their fourth-quarter earnings reports this week.
Bank of America and Citigroup sank more than 3%, while Wells Fargo dropped 2.5% and JPMorgan Chase fell 2.3%.
Treasury yields dropped along with share prices, suggesting that some investors were moving from stocks into the perceived safety of U.S. government debt. The yield on the benchmark 10-year Treasury note fell to 3.71% from 3.81% late Monday.
In Europe, key stock indexes slid 0.7% in Britain, 1.1% in France and 1.6% in Germany.