US stocks drop on downbeat earnings

Wall Street has fallen in a day of heavy trading, with the S&P 500 posting its biggest percentage drop since late June as investors turned risk-averse on disappointing earnings and escalating global tariff worries.

Chinese technology company Tencent Holdings Ltd reported its first profit decline in almost 13 years, putting pressure on the US tech sector.

Technology stocks were the biggest drag on the S&P 500 and the Nasdaq, with the S&P 500 technology index down 1.1 per cent.

Retail shares fell as Macy's Inc stock tumbled 15.9 per cent after margin fears spooked investors, overshadowing its stronger-than-expected sales and earnings.

"There was a lot of optimism heading into retail earnings," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

Macy's results have "taken an edge off that optimism," he added.

Second-quarter U.S. earnings have mostly been stronger than expected, with 79.1 per cent beating analyst expectations, according to Thomson Reuters I/B/E/S.

The trade fracas heated up as Turkish President Tayyip Erdogan doubled tariffs on some US imports, and China lodged a complaint with the World Trade Organisation against American trade policies.

The tariff-sensitive industrial sector slipped 0.5 per cent, with Caterpillar Inc and Boeing Co weighing on the Dow.

The S&P 500 energy index dropped 3.5 per cent as a fall in crude prices was exacerbated by an unexpected surge in US stockpiles.

Metals prices fell, dragging down the materials sector , which ended down 1.6 per cent. The S&P 1500 metals and mining index was down 4.8 per cent.

The Dow Jones Industrial Average fell 137.51 points, or 0.54 per cent, to 25,162.41, the S&P 500 lost 21.59 points, or 0.76 per cent, to 2,818.37 and the Nasdaq Composite dropped 96.78 points, or 1.23 per cent, to 7,774.12.