"We've got obviously a very fragile psyche. And the consumer confidence number basically confirmed that," he said. "People are waiting for the next shoe to drop in terms of the financial debacle."

Smith also noted that forced selling by funds is adding to the market's difficulty.

"You have a tug of war between the folks who believe there is a fundamental value in the market and that we aren't going into the abyss and the people who are being forced to sell because of margin calls," he said.

In a margin call, a broker who lent money to an investor calls in the loan, forcing the investor to sell stock to repay the loan.

In corporate news, Whirlpool fell $6.52, or 13 percent, to $43.51 after lowering its earnings forecast for the year. The nation's largest home appliance maker, which also announced plans to cut about 5,000 jobs by the end of 2009, cited tightness in the credit markets and predicted demand will continue to slide in North America and Europe.

Boeing Co. rose $2.46, or 5.8 percent, to $44.82 after the company and its striking machinists' union hammered out a tentative four-year labor deal that could end a 53-day walkout that has idled factories and delayed jet deliveries.

The reports came as fallout from credit market troubles popped up around the globe. Iceland's central bank on Tuesday raised its key interest rate by an enormous 6 percentage points to 18 percent. Iceland has seen its currency tumble after its banking sector collapsed this month. Prime minister Geir Haarde said separately on Tuesday that the country will require $4 billion in financial support in addition to the $2 billion loan package announced by the IMF.

Meanwhile, Germany's foreign minister said Tuesday that Pakistan must secure a loan from the IMF within a week to avoid sliding into a financial crisis.

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