US close: Stocks close lower as weak corporate earnings weigh on sentiment

US stocks closed lower on Tuesday, as traders took their cues Asian and European markets and weak earnings, worries about US-Saudi relations and Italy's finances weighed on sentiment.

At the close, the Dow Jones had lost 0.50% to 25,191.43, while the S&P 500 closed out the day 0.55% lower at 2,740.69 and the Nasdaq was 0.42% softer at 7,437.54.

While the Dow Jones ended the day 125 points weaker, the index's closing price was far from the worst level seen throughout the sessions as concerns surrounding global economic growth and dire earnings outlooks hit equity markets.

Oanda analyst Craig Erlam said the selloff was down to the multiple underlying risk factors in financial markets at the moment, be they US interest rates, Brexit, Italian debt, trade wars or emerging markets.

"These are all destabilising factors and sentiment may finally be caving under the weight of it all. Trump's tax cuts ensured that the US is the last to fall, with companies reporting stunning earnings growth in the first two quarters and the third shaping up the same way, but this can only last so long and its finally taking its toll."

"The question now is how bad it gets and what is done to reassure investors."

On the home front, Republican lawmakers seemed to be somewhat confused after Donald Trump told supporters over the weekend that Congress would be voting on a new tax cut for middle-class Americans following the mid-term elections, despite those same lawmakers having never heard of any such legislative proposals.

Worries about souring relations between the US and Saudi Arabia dented investors' appetite for risk after Donald Trump said on Monday that he was not satisfied with the Kingdom's response over the killing of journalist Jamal Kashoggi.

In addition, comments from Turkish President Erdogan sparked concerns about a diplomatic crisis in the region, after he said there was strong evidence that Kashoggi's killing was premeditated. Addressing MPs from his ruling party, Erdogan demanded that Saudi Arabia give answers about where the journalist's body was and who ordered the operation.

Italy was still firmly in focus as well, after the European Union - in an unprecedented move - rejected the country's budget proposals.

In corporate news, Harley-Davidson lost 2.20% despite the iconic motorcycle maker's confirming its full-year shipment forecasts after its third-quarter adjusted earnings beat expectations.

United Technologies, on the other hand, edged up 2.86% after its third-quarter profit and sales surpassed analysts' expectations and the company lifted its outlook.

Low-cost airline JetBlue stock inched forward 0.33% after the release of its third-quarter numbers and fast food giant McDonald's rallied 6.39% after its third-quarter results beat estimates.

3M and Caterpillar dropped 4.44% and 7.56% throughout the session, respectively, as the industrial giants said material costs were on the up.

Tesla shares took off 12.72% after long-time critic Citron Research, who is actually suing the carmaker, reversed its opinion on the stock to 'long' from its previous 'short' recommendation.

On the data front, the Richmond Fed's manufacturing index dropped to a reading of 15 in October.

Fifth District manufacturing activity expanded moderately in October, according to the results from the most recent survey by the Federal Reserve Bank of Richmond.

The composite index fell from 29 in September to 15 in October, as indexes for shipments and new orders dropped, while the third component, employment, rose. Analysts were expecting a reading of 25.

However, respondents were seemingly optimistic, expecting to see positive growth across most measures in the near future.