Stocks fell Tuesday morning after North Korea and South Korea exchanged artillery fire near their disputed sea border, killing at least two South Korean marines. Treasury prices and the dollar rose as investors sought safe places to park money.
A weak reading on existing home sales for October also dragged stocks lower. Shares were also falling in Europe on concerns that a bailout of Ireland may not be enough to contain Europe's debt crisis. Borrowing costs for Portugal and Spain rose, leading Spain to trim the size of a debt sale.
The Dow Jones industrial average fell 135, or 1.2 percent, to 11,042 in morning trading.
The Standard & Poor's 500 lost 11, or 0.9 percent, to 1,186. The Nasdaq composite index fell 33, or 1.3 percent, to 2,499.
Hewlett-Packard Co. was the only one of the 30 stocks that make up the Dow Jones industrial average to rise. Shares gained 1.4 percent after the technology company beat Wall Street's expectations for revenue and income thanks to strong corporate spending.
Energy shares led the decline as the price of crude oil fell. Exxon Mobil Corp. was the biggest loser in the Dow, falling 2.6 percent. Chevron Corp. was not far behind with a loss of 2.5 percent. Crude oil fell 88 cents to $80.85.
Shares of Netflix Inc. rose 1 percent after the movie rental company announced a new pricing structure aimed at weaning customers off of DVDs. The company announced a cheap plan that offers movies and TV shows only through online streaming.
In economic news, sales of previously owned houses dipped 2.2 percent in October, according to the National Association of Realtors. That puts sales at a seasonally adjusted rate of 4.43 million units. Economists had expected a rate of 4.5 million.