Stocks extended losses by late morning Tuesday after a reading on China's factory activity disappointed and sparked fears over the global economic growth.
The S&P 500 was down 1.2%, the Dow Jones Industrial Average fell 1.1%, and the Nasdaq slid 1.3%. The Nasdaq is down for the eighth time in nine sessions, while the S&P 500 and Dow are down for the third time in four.
An unofficial reading on factory activity in China fell further into contraction in April, cementing concerns over the health of the world's second-largest economy. The Markit and Caixin Media survey saw activity fall to 49.4 in April from 49.7 in March, declining further below 50, the level separating expansion from contraction. This is the 14th straight month in contraction.
A change in policy from the Reserve Bank of Australia also triggered fears over the health of the global economy. The central bank cut rates for the first time in a year as its economy faces record-low inflation and a stronger U.S. dollar that pressured demand for its oil, basic materials and other local products internationally. Its cash rate target was cut to a new low of 1.75%. The chances of a rate cut were over 50%.
Crude oil was also sharply lower for a second day ahead of weekly inventory data that will be released after the closing bell. Oil has pulled back as fears over a supply glut and growing production returned after a surge of nearly 20% in April. West Texas Intermediate was down 2.8% to $43.55 a barrel.
The auto industry was on watch on Tuesday as sales for April were released throughout the day. Carmakers appeared to rebound from weakness in March, extending the record level of sales achieved a year earlier.