NEW YORK ( TheStreet) -- Stocks decayed throughout Tuesday's session and the Dow closed below the 11,000 mark, as investors sold off on fears of a contagion spreading throughout Europe after Standard & Poor's downgraded Greek debt to junk status and docked Portugal's rating down by two notches.

The Dow Jones Industrial Average plunged 213 points, or 1.9%, to 10,992. The S&P 500 slid 28 points, or 2.3%, to 1184, and the Nasdaq shed 51 points, or 2%, at 2471.

U.S. stocks tumbled deep into negative territory, spurring a flight to safe assets as Standard & Poor's downgraded Greece's debt to junk status and lowered Portugal's credit rating by two notches to A- from A+.

"Everyone has a fear it'll trigger some kind of reaction, like it's the subprime mortgage crisis of Europe. There's the Goldman ( GS) overhang as well and the two are combining to lead the market lower ," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com, who noted the market's recent run up as further incentive for profit-taking. "We thought we had this thing kind of stabilized, and all of a sudden it's popping. We thought this thing was coming to an end, but now it's like waiting for another shoe to drop."

Overseas, Hong Kong's Hang Seng fell 1.5% while Japan's Nikkei rose 0.4%. The FTSE in London lost 2.6%, and the DAX in Frankfurt shed 2.7%.

Peter Cardillo, chief market economist at Avalon Partners, acknowledged that the market is ripe for a pullback but believes Greek contagion fears will only exert short-term pressure on the market.

"Earlier we had strong consumer data and good earnings reports from Ford ( F), DuPont ( DD) and UPS ( UPS), but even more important is what these companies have been saying about the strength of the economy," Cardillo said. "Even these downgrades eroded earlier gains, we have Fed decision tomorrow afternoon, which may rephrase the 'extended period language' and give a better assessment of the economy. Plus we have the GDP report on Friday," he said, adding, "I just don't think the market is ready to move into a steeper pullback. I think this weakness will probably be short-term."

Goldman Sachs executives are testifying before the Senate Permanent Subcommittee on Investigations during a hearing on the firm's role in the financial crisis.

Late Monday, Democrats failed to get the 60 votes needed to move forward with the financial reform bill .

The Economy

The Conference Board said its consumer confidence index came in at 57.9 in April, from March's reading of 52.3. The level was much higher than the 53.7 reading that economists had been expecting.
Dining Out

The Federal Open Market Committee begins a two-day meeting that will culminate in a rate decision announcement on Wednesday afternoon. Although economists aren't expecting any change to rates, the market will pay close attention to the statement for a better sense as to when higher rates can be expected.

Late Tuesday, the American Petroleum Institute said crude oil supplies jumped by 5.34 million barrels last week, far more than the 1.4 million barrel build expected by analysts surveyed by Platts. The Energy Information Administration will release their inventory figures for the week ending 23 on Wednesday at 10:30 a.m. EST.

Company News

3M ( MMM) topped first-quarter estimates and raised its year-end guidance. The company said it expects full-year organic sales to grow 10% to 12%, from a previous forecast for growth of 5% to 7%. Shares rose 0.6%, making it the lone Dow performer to finish in positive territory. Shares of Wal-Mart ( WMT) finished flat.

Caterpillar ( CAT), Alcoa ( AA) and DuPont ( DD) were the biggest laggards on the Dow.

Ford ( F) shot past analysts' estimates for earnings of 31 cents a share with an adjusted pretax operating profit of 46 cents a share and said it expects to deliver solid profits in 2010. The stock, which shed 89 cents, or 6.2%, to $13.57, was the most heavily traded on the New York Stock Exchange following Citigroup ( C).

The NYSE had a listed volume of 7.5 billion and the Dow saw volume of 263 million shares, compared to an average of 200 million.

Shares of CIT Group ( CIT) slipped 1.8% after the provider of commercial financing, leasing products and advisory services reported a surprise profit of 49 cents a share in John Thain's first reporting period as chief executive of the bank holding company.

Although profits slipped during Western Union's ( WU) first quarter, the money transfer and payment services company managed to meet analysts' estimates and reaffirmed its year-end guidance.

UPS ( UPS) said improved revenue and operating leverage helped lift earnings by 37% in the first quarter.

Tyco International ( TYC) swung to a profit in the second quarter and surpassed analysts' expectations with adjusted earnings of 59 cents a share on sales of $4.169 billion.

BP ( BP) said profits rose to $6.08 billion from $2.56 billion a year ago on improved selling prices and lower production costs.

Also in the energy sector, oil refiner Valero Energy ( VLO) posted a loss in the morning, though bested forecasts, after getting hit by downtime at a series of refineries.

DuPont ( DD) exceeded analysts' estimates and raised its year-end profit estimate.

Office Depot ( ODP) swung to a first-quarter profit but fell short of analysts' estimates.

Networking specialist Riverbed ( RVBD) is teaming with Verizon ( VZ) to improve traffic across corporate networks.

Drugmaker AstraZeneca ( AZN) reached a $520 million settlement with the federal government, the Associated Press reported, over the promotion of the drug Seroquel.

Commodities and the Dollar

The June delivery crude oil contract traded $1.76 lower to settle at $82.44 a barrel.

Elsewhere in commodity markets, the June gold contract gained $8.20 to settle at $1,162.20 an ounce.

The dollar was trading higher against a basket of currencies with the dollar index up by 1.3%.

Treasuries

The U.S. Treasury's $44 billion auction of 2-year notes had a high yield of 1.024% and a bid-to-cover ratio of 3.03.

Prices on Treasury securities jumped as European debt fears spurred a flight to quality.

The benchmark 10-year Treasury strengthened 1 1/32, diluting the yield to 3.684%.

The two-year note rose 6/32, dropping the yield to 0.959%. The 30-year bond gained 1 19/32, lowering the yield to 4.568%.

--Written by Melinda Peer and Sung Moss in New York.