US STOCKS-Wall Street dragged lower by global worries

                                

                                
 * China fears pressure commodities, Ireland still in focus
                                
 * Wal-Mart, Home Depot quarterly earnings top estimates
                                
 * Dow off 1.6 pct, S&P off 1.6 pct, Nasdaq off 1.8 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
  (Updates with volume in final two paragraphs, VIX rising in
paragraph 11)
                                
 By Leah Schnurr
                                
 NEW YORK, Nov 16 (Reuters) - U.S. stocks fell nearly 2
percent on Tuesday as the prospect of more European bailouts
and worries China will rein in inflation prompted investors to
abandon risky assets.
                                
 The developments, especially questions about Ireland's
financial stability, caused a spike in the U.S. dollar, which
hit commodity prices. That in turn sent equities lower, with
natural resources companies leading the way down.
                                
 "Is dollar strength just a correction in a larger trend of
dollar weakness, or are we beginning to turn around here?" said
Bill Strazzullo, partner and chief investment strategist at
Bell Curve Trading in Boston.
                                
 "If it looks like the U.S. dollar is finally stabilizing
here and gaining its footing, we're going to have a good-sized
pullback in equities and commodities markets."
                                
 Asset classes have become increasingly entwined since
investors placed bets ahead of the Federal Reserve's
announcement of further quantitative easing. Now, many
investors that bet on Fed stimulus are unwinding those risky
positions.
                                
 One result was a slide in resource stocks, such as Alcoa
Inc <AA.N>, which fell 2.8 percent to $13.03, and Exxon Mobil
Corp <XOM.N>, which dropped 2.2 percent to $68.94. U.S. crude
oil futures settled 3 percent lower at $82.34 a barrel, gold
and metal prices fell and the dollar index jumped 0.9 percent.
                                
 The S&P materials sector <.GSPM> gave up 2.2 percent. Tech
shares <.GSPT> also stumbled, falling 1.9 percent, as investors
fled for safety.
                                
 The Dow Jones industrial average <.DJI> dropped 178.47
points, or 1.59 percent, to 11,023.50. The Standard & Poor's
500 Index <.SPX> shed 19.41 points, or 1.62 percent, to
1,178.34. The Nasdaq Composite Index <.IXIC> gave up 43.98
points, or 1.75 percent, at 2,469.84.
                                
 Ireland, which is grappling with a battered banking sector,
said it was discussing stabilization measures with its European
partners, while China is expected to unveil food price controls
and crack down on commodity speculation to contain inflationary
pressure. For details, see [ID:nLDE6AE2AI] [ID:nL3E6MG081]
                                
 The Chinese media reports increased expectations that China
will further tighten monetary policy to help fight inflation.
                                
 The CBOE Volatility Index <.VIX>, known as Wall Street's
fear gauge, climbed 11.8 percent to 22.58, its highest close in
more than a month.
                                
 The S&P found support around the 1,176 level, which is
roughly the 23.6 percent Fibonacci retracement of the
benchmark's recent rally from the 2010 low in July to its more
than two-year high hit earlier this month.
                                
 After rallying nearly 13 percent through September and
October, the S&P 500 has given up nearly 4 percent since Nov.
5.
                                
 "If we don't see the S&P back above 1,200 in the next
couple days, then I think we're potentially putting in some
sort of top here," said Strazzullo.
                                
 Continued speculation over whether the Federal Reserve will
spend all of the $600 billion it had earmarked for its latest
round of quantitative easing also pressured the market.
                                
 St. Louis Fed President James Bullard said in an interview
with Bloomberg Radio the central bank would scale down its
planned purchases of Treasury bonds only if there was a strong
improvement in the U.S. economy. [ID:nN16134186].
                                
 Global developments overshadowed a favorable U.S. corporate
picture as Wal-Mart Stores Inc <WMT.N> and Home Depot Inc
<HD.N> raised their profit forecasts for the year.
                                
 The two companies were the only Dow stocks to rise.
Wal-Mart added 0.6 percent to $54.26 after it also forecast
positive same-store sales for the holiday season, and Home
Depot rose 1 percent to $31.71, though it cut its full-year
sales outlook. [ID:nN1691422] [ID:nN1627318].
                                
 Volume surged with about 9.67 billion shares traded on the
New York Stock Exchange, the American Stock Exchange and
Nasdaq, above last year's estimated daily average of 9.65
billion.
                                
 Declining stocks handily outnumbered advancing ones on the
NYSE by 2,642 to 405, while on the Nasdaq, decliners beat
advancers 2,103 to 548.
 (Reporting by Leah Schnurr; Additional reporting by Rodrigo
Campos; Editing by Kenneth Barry)