NEW YORK — Investors are suffering another bout of pessimism about the strength of the global economic recovery and the health of U.S. banks.
Stocks fell sharply Tuesday, sending the Standard & Poor’s 500 index down nearly 1 percent. Demand for the safety of Treasurys sent bond prices higher and interest rates lower, tightening the market barometer known as the yield curve.
A disappointing profit report from Alcoa and moves by China to curtail growth raised questions about whether a 10-month surge in stocks can be sustained. At the same time, financial stocks slid on concerns the government would impose taxes on bailed-out banks.
Alcoa slid 11 percent after its earnings and revenue fell short of expectations. The aluminum producer is usually the first big U.S. company to report quarterly results, and investors look to its numbers for an early read on overall corporate earnings.
The Dow Jones industrial average fell 36.73, or 0.3 percent, to 10,627.26. The S&P 500 index fell 10.76, or 0.9 percent, to 1,136.22, after advancing for the first six days of the year for the first time since 1987. The Nasdaq composite index fell 30.10, or 1.3 percent, to 2,282.31.
Bond prices rose as questions about the economy increased demand for the safety of government debt. That pushed the yield on the 10-year Treasury note down to 3.72 percent from 3.82 percent late Monday.
Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said banks are getting mixed signals from Washington. Some were told to accept bailout money, then boost lending and now perhaps pay the government as they try to stabilize.
“If I were running a bank, I’d feel like a pretzel being pulled in four different directions,” he said, adding that hefty requirements from the government could endanger the banks’ recovery.
Alcoa’s report, which blamed weakness in aerospace, construction and gas turbines for the miss, weighed on energy and industrial stocks. The slide comes after Chevron warned late Monday that it expects that thin profit margins will hurt its earnings.
Concerns about the prospects for Alcoa and other companies that produce raw materials rose after China again tightened monetary policy and raised the amount of money banks must hold in reserve.
