Updated from 4:10 p.m. EDT

Evidence the consumer is wavering just as the

Federal Reserve

grows more resolute pummeled stocks Tuesday, erasing all of last week's rally. Tech shares bore the brunt of the pain.

After ending last week with three straight days of gains, the

Dow Jones Industrial Average

plunged 184.18 points, or 1.63%, to 11,094.43, while the

S&P 500

fell 20.29 points, or 1.58%, at 1259.87. The

Nasdaq Composite

lost 45.63 points, or 2.06%, at 2164.74.

Tuesday's session extended an ultra-volatile month for U.S. equities that has now included four separate declines of more than 100 points on the Dow and a cumulative 7.3% pasting on the Nasdaq.

"We're witnessing an unraveling of gains as the global economic fears have popped back up on our radar," said Paul Nolte, director of investments with Hinsdale Associates. "The bounce we had last week is now in the rear-view mirror. The fears of a weak economy have reemerged and it's driving trades."

"It's the same old story that slaughtered us," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "While we had a technical bounce last week, things didn't change that much. Stock prices are still trying to get readjusted from the potential impact of higher energy prices. We still haven't found that level yet."

Driving the selloff was

Wal-Mart

(WMT) - Get Report

, which said same-store sales should rise 2.3% in May, toward the low end of its previous range. Wal-Mart cited high gasoline prices and reported that shoppers are concentrating their purchases around payday, suggesting that savings are running thin. Wal-Mart fell $1.35, or 2.7%, to finish at $48.30.

Also Tuesday, the Conference Board said its May consumer confidence index fell to 103.2 from 109.2 a month earlier. Later this week, investors will see minutes from the last

Federal Reserve

meeting on Wednesday and the May employment report on Friday.

Before the bell, Chicago Fed president Michael Moskow said, "Inflation is at the upper end of a level that I think is consistent with price stability and is a situation we have to monitor very carefully," during an interview on

CNBC

.

"The Fed ought to be more concerned with the clear signs of slowing spending," said Ian Shepherdson, chief economist with High Frequency Economics. "It is true that wage increases are picking up steam but earnings are still rising less quickly than is implied by the historic link with the unemployment rate. We are unconcerned by the rise in inflation expectations."

The Dow was also under pressure after Deutsche Bank cut its rating on component

General Motors

(GM) - Get Report

to sell from hold, citing its recent run-up. Two upgrades lifted GM shares 14% last week. GM dropped $1.51, or 5.4%, to $26.57.

Microsoft

(MSFT) - Get Report

shares also closed lower after Caris & Co. downgraded the stock to average from above average. The firm cited concerns over increasing competition for the software giant. Microsoft was off 57 cents, or 2.4%, to close at $23.15.

In addition to Wal-Mart, GM and Microsoft, all 27 other Dow components posted losses, with

Alcoa

(AA) - Get Report

,

Caterpillar

(CAT) - Get Report

,

Home Depot

(HD) - Get Report

and

Merck

(MRK) - Get Report

finishing down by 2.5% or more.

"There is no rush to become fully invested, as there is little reason to believe that the market is running away on the upside," said Ken Tower, chief market strategist with CyberTrader.

Peter Cardillo, chief market strategist with S.W. Bach & Co., said he was expecting a tough time for Wall Street as investors worry about an economic slowdown. "The market may remain choppy for the rest of the week ahead of data about what the Fed thinks about inflation," he said. "We're nervous again, and this will probably continue for the whole week."

To view Kara Wetzel's video take on today's market, click here

.

About 1.55 billion share changed hands on the

New York Stock Exchange

, with decliners outpacing advancers by a 3-to-1 margin. Volume on the Nasdaq was 1.75 billion shares, with decliners beating advancers 3 to 1.

In other markets, the 10-year Treasury bond fell 7/32 in price to yield 5.08% and the dollar pulled back against the yen and euro.

Stocks rose last week, bouncing from some of their lowest levels of the year as traders found bargains after a two-week selloff. Still, since peaking around May 10, the Dow is down 3.8%, the S&P 500 has lost 3.5%, and the Nasdaq has plunged 6.4%.

"We're witnessing an unraveling of gains as the global economic fears have popped back up on our radar," said Paul Nolte, director of investments with Hinsdale Associates. "The bounce we had last week is now in the rear-view mirror. The fears of a weak economy have reemerged and it's driving trades."

Commodity prices were firming Tuesday, with gold adding $2.90 to close at $653.90 an ounce and July crude gaining 66 cents to $72.03 a barrel. Oil traders are eying an OPEC meeting in Venezuela this week where ministers are widely expected to leave currently record-high production quotas in place.

President Bush named Hank Paulson, the chief executive of

Goldman Sachs

(GS) - Get Report

, to be the next U.S. Treasury secretary. If confirmed by Congress, Paulson will replace John Snow, who is resigning.

Virtually all sectors were under water Tuesday, with a 2.7% loss on the Nasdaq Transportation index leading the way lower. Elsewhere, the Nasdaq Computer index was off 2.1%, the Nasdaq Biotech index fell 2%, and the Philadelphia Semiconductor Sector index ended the session down 2.2%.

In merger news Tuesday,

Kinder Morgan

(KMP)

is weighing an offer from the pipeline company's top executives to buy out public shareholders for $100 a share. The proposal values outstanding stock 18% higher than its Friday close. Shares gained $2.39, or 5.3%, to $47.43.

Chemicals concern

Engelhard

(EC) - Get Report

reportedly plans to accept a $39-a-share buyout offer from Germany's BASF. Engelhard resisted BASF for six months but will concede as early as today after finding no viable counter-offers. Shares of Engelhard tacked on 25 cents, or 0.7%, to finish at $38.93.

European telecom

Vodafone

(VOD) - Get Report

reported a $41 billion loss for its latest fiscal year Tuesday, citing writeoffs in Germany and Italy. On a continuing operations basis, the loss was slightly narrower than expected, and the company raised its targeted dividend and buyback program for 2006 by 50%. Vodafone was higher by 25 cents, or 1.1%, to $22.54.

Several brokerages made significant changes to their stock recommendations early Tuesday.

Sun Microsystems

(SUNW) - Get Report

went to buy from neutral at UBS;

Wyeth

( WYE) went to neutral from buy at Merrill Lynch; and

Sirius

(SIRI) - Get Report

went to overweight from neutral at Lehman Brothers.

Sun Microsystems rose 13 cents, or 2.9%, to $4.55. Sirius was higher by 21 cents, or 5%, to close at $4.39. Wyeth lost $1.55, or 3.2%, to $46.32.

Overseas markets were lower, with London's FTSE 100 down 2.4% to 5652 and Germany's Xetra DAX off 2.3% to 5622. In Asia, Japan's Nikkei shed 0.4% overnight to 15,859, while Hong Kong's Hang Seng lost 0.7% to 15,858. Most overseas markets also fell on Monday, when U.S. trading was closed for Memorial Day.