The major domestic equity indexes were lower once again on Tuesday, as concerns over the ongoing outlook for earnings added to recent selling pressure. Nonetheless, the major indexes ended well off their lows for the day as investors went after beaten-down shares late in the session.

Caterpillar closed out the trading day with a loss of 7.6 percent despite maintaining its 2018 earnings forecast, although the company did forecast increases in the previous two quarters.

3M was down 4.4 percent on the day after cutting its full-year earnings projection due to foreign currency-related challenges. That reignited worries over the impact of rising borrowing costs, wages and tariffs on corporate profits and caused S&P industrial stocks to slide 1.6 percent.

Along with worries over profit growth, concerns over the upcoming mid-term elections and Italy’s budget have also sent investors scrambling to exit stage left.

The S&P 500 energy index fell 2.7 percent, the most of any sector, as oil prices plunged after Saudi Arabia said it could supply additional crude quickly if needed.

Investors trimmed most of the losses in afternoon trading the idea the market was oversold began to take hold. Technical buying at support levels around 2,700 on the S&P 500 did not hurt activity.

The S&P 500 has declined for five straight sessions and is now down 6.5 percent from its record closing high on Sept. 20.

The Nasdaq again flirted with correction territory, falling more than 10 percent from its Aug. 29 record closing high before paring losses to end off those levels.

Earnings from S&P 500 companies are expected to have increased about 22 percent in the third quarter from a year ago, though 2018 is seen as a peak for the profit cycle, according to I/B/E/S data. Microsoft, Intel and Alphabet all are due to report this week.

Among those closing in positive territory, McDonald’s rose 6.3 percent after it exceeded estimates for quarterly same-store sales on strong demand in international markets.

Verizon closed with a gain of 4.1 percent after it exceeded estimates for earnings and net new phone subscribers.

Approximately 9.1 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.9 billion share daily average over the past 20 trading days, according to Thomson Reuters data.

Is the Stimulus from Tax Cuts Wearing Thin?

The three-week stock market sell-off may signal concerns that the massive stimulus from the recent tax cut legislation and government spending will fade sooner than expected, a central issue for the Federal Reserve as it considers when to halt interest rate hikes.

While the more than 7 percent decline this month in the S&P 500 index, which on Tuesday hit July levels, is unlikely to derail plans for increased monetary tightening in December, the sell-off could begin to convince the Fed to scale back plans to continue rate rises next year and even in 2020.

More selling in the weeks and months ahead could cause dissension among policymakers in what is currently a remarkably unified central bank as businesses try to make the point that the economy cannot withstand acombination of trade-related knocks to global growth, rising prices and higher borrowing costs.

The economy expanded at an annualized 4.2 percent rate, more than twice its potential, in the second quarter as fiscal stimulus of $1.8 trillion in tax cuts took hold. Since then it has likely cooled. However, the Fed still expects the economy to grow at 2.5 percent next year, as they predict the beginning of a smooth return to more normal economic growth.

Hints of inflation and continued rising wages in the labor market have allowed the Fed to settle into a gradual, quarterly rate-hike cycle.

Currently the Fed needs to identify when fiscal policies, which could boost productivity, are eclipsed by trade policies that could stimulate inflation. The answer may determine whether rates, now just above 2 percent, ultimately rise to nearly 3.5 percent, as officials predict.

Goldman Sachs economists estimated the half percentage-point boost to economic growth from higher stocks earlier this year disappeared in October. A further 10 percent market drop would add to the drag and, coupled with “waning” fiscal support, could push growth below the economy’s potential of about 2 percent next year, the bank said.

American industrial heavyweights Caterpillar and 3M Co on Tuesday pointed to disappointing profits on the horizon, due to a slowing global economy, higher dollar and no clear end to a U.S.-China tariff standoff. That sentiment, along with worries that China’s economy is slowing and geo-political tensions rising, sparked Tuesday’s sell-off.

Before March, when the first of the recent tariffs were announced on Chinese goods, the 23 companies most exposed to China had easily outperformed peers in the S&P index. Since then fortunes have sharply reversed and they have lagged peers by nearly 15 percent.

Rate hikes tend to slow the economy with a lag, complicating the question of when the Fed should stop. Difficult to judge when there is considerable fiscal stimulus in place.

Corporate earnings growth is slowing after a bumper start to the year, and the reality of an escalating trade war between two of the world’s largest economies is starting to weigh on companies ranging from Caterpillar Inc to Ford Motor Co.

While earnings growth is still high at 22 percent so far this quarter, the amount by which S&P 500 companies are exceeding estimates is nearly half of what it was during the first quarter, according to Refinitiv data.

Along with rising interest rates which are making bonds more attractive, slower earnings growth is eroding investor sentiment and contributed to Tuesday’s sharp sell in equities globally.

Caterpillar, the world’s largest construction equipment maker, said before the U.S. market opened on Tuesday that Trump’s steel import tariffs, along with higher freight charges, cost it about $40 million in its most recent quarter.

The forward price to earnings ratio of the S&P 500 index was 16.2 as of Monday, down from a 2018 peak of 18.5 on January 22, according to Refinitiv data. At the same time, U.S. companies are on pace to purchase more than $1 trillion of their own stock this year, according to TrimTabs Investment Research, and lower valuations could lure them to buy more.

The forward price to earnings ratio of the S&P 500 index was 16.2 as of Monday, down from a 2018 peak of 18.5 on January 22, according to Refinitiv data. At the same time, U.S. companies are on pace to purchase more than $1 trillion of their own stock this year, according to TrimTabs Investment Research, and lower valuations could lure them to buy more.

The $1.5 trillion tax cut raised corporate earnings earlier this year, and encouraged companies to repatriate cash parked overseas, but the tax cuts are now being offset by costs resulting from the new import tariffs.

Among companies citing tariffs as a negative factor, 3M saw its shares fall nearly 6.0 percent after its sales fell below forecasts by the most in 2 years and after it cut its earnings estimates due to a slowdown in China and rising tariff costs.

Overall, the earnings growth rate of S&P 500 index companies peaked in the first quarter of this year at 26.6 percent, according to Refinitiv data.

The third quarter is currently on pace for a 22.1 percent growth rate, while earnings growth is expected to slide to a 9.0 percent increase in the second quarter of next year as companies face tougher comparisons due to the tax cut benefit in 2018. Other concerns include rising interest rates.