Investors are beginning to realize that third-quarter earnings are as bad as everyone feared. 

IBM (IBM - Get Report) became the latest poster child for disappointing results on Tuesday, posting a bigger-than-expected 14% drop in sales.

The stock got crushed and pulled the rest of the market down with it. The S&P 500 closed off 0.12%, the Dow Jones Industrial Average fell 0.1%, and the Nasdaq dropped 0.5%.

Stocks are likely heading into an "earnings recession," which is two or more quarters of negative earnings growth. Only a fraction of the S&P 500 have reported so far, but the trends are clear--average earnings have dropped 5.1%, while sales have declined 3.7%. 

"So far [the earnings season] appears to be on track to be a lackluster one," said Peter Cardillo, chief market economist at Rockwell Global. "In fact, as we suspected the theme of sour revenue growth among the multi nationals is indeed unfolding."

United Technologies ( UTX - Get Report)   also reported lower-than-expected quarterly sales as the strong dollar hurt revenue amid engine-delivery delays. However, shares rose after the company announced a $12 billion share buyback program and after net income of $1.67 bested estimates of $1.55.

Other companies reporting on Tuesday included Harley-Davidson (HOG - Get Report)  which fell more than 15% after a disappointing quarter and reduced full-year forecasts. The motorcycle manufacturer expects to ship 265,000 to 270,000 units for the full year, down from at least 276,000, as it faces an increasingly competitive environment. Third-quarter net income of 69 cents a share was flat from a year earlier and missed estimates by 9 cents. Harley-Davidson said it would cut jobs as a result of weakened demand, though declined to detail the extent of layoffs.

Verizon (VZ - Get Report) climbed more than 1% after beating earnings and sales estimates in its third quarter. The telecom giant earned $1.04 a share, 2 cents above estimates, while revenue jumped 5% to $33.16 billion. Increased revenue was driven by growth in Fios and Verizon's wireless business.

Travelers (TRV - Get Report) released a better-than-expected third-quarter report. Net income of $2.97 a share beat estimates by 70 cents, while revenue jumped 2.7% to $6.19 billion.

Sonic Restaurants (SONC) added nearly 5% after same-store sales in its fourth quarter increased 7.3%, a significant increase in growth from a 6.1% increase last quarter. Quarterly profit of 43 cents a share beat estimates by a penny.

The reporting season shifted gears on Tuesday in a week in which more than 100 S&P 500 companies will report their recent quarter, double the number that have reported since the season began early October. Other companies reporting this week include eBay (EBAY - Get Report) , Alphabet (GOOGL - Get Report) , and McDonald's (MCD - Get Report) . 

But, even as earnings decline, the stock market mightn't fall alongside them. Weaker energy prices, a stronger dollar and spendthrift consumers pulled second-quarter results lower and their effects weren't expected to dissipate before the third quarter began. 

"For this quarter in aggregate, earnings are likely to beat expectations," Brad McMillan, chief investment officer for Commonwealth Financial Network, wrote in a note. "This is actually pretty normal, as companies try to guide expectations to a level they are pretty sure they can beat. Nonetheless, when earnings come in higher than expectations, the market often gets a boost. The results, even with a decline, can therefore be a positive for the market over the rest of the year."

Ferrari has priced its initial public offering at $52 a share, according to CNBC. The price was within the expected range and will value the company at around $10 billion. Fiat Chrysler (FCAU - Get Report) currently owns 90% of the company, a stake which will be reduced to 80% after Ferrari floats.