By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

Alcoa unofficially kicks off earnings season with weaker-than-expected results

U.S. stocks traded firmly lower on Tuesday as disappointing results from aluminum giantAlcoa Inc. set the tone for the broader market as the third-quarter earnings season gets under way this week.

Shares of Alcoa (AA) dropped more than 9% in early trade, and were on track for their worst daily drop in about five years, according to FactSet data.

A retreat in oil prices also weighed on energy and materials stocks.

The S&P 500 index fell 16 points, or 0.8%, to 2,147, with all of its main sectors trading lower. Health-care and materials sector were leading decliners, down nearly 1.5%.

The Dow Jones Industrial Average dropped 120 points, or 0.7%, to 18,208, with Visa Inc.(V) and Intel Corp(INTC) leading losses.

Meanwhile, the Nasdaq Composite Index fell 40 points, or 0.8%, to 5,288, dragged down by heavy losses in biotech stocks. The iShares Nasdaq Biotechnology ETF (IBB) was down 2.5%.

"Today's slump in stocks is mostly due to a retreat in oil and commodities in general, as well as disappointing earnings from Alcoa," said Ryan Larson, head of equity trading at RBC Global Asset Management.

Some analysts also pointed out that rising expectations for a rate increase in December are pushing up the dollar as well as Treasury yields.

The dollar, as measured by the ICE U.S. Dollar Index rose 0.4% to 97.27, from 96.92 seen late in New York on Monday.

Expectations for a rate increase at the end of the year also pushed up the yields on the 10-year Treasurys to 1.77%, the highest in four months.

"This [dollar strength] is starting to make life difficult for U.S. stocks, but hopefully earnings season will jolt the S&P 500 out of its current grinding range," said Chris Beauchamp, IG's chief market analyst, in a note to investors. The ICE U.S. Dollar Index , a gauge of six rival currencies, gained 0.5% at 97.4660.

The pound marked fresh losses after media reports of leaked government papers that predict the country stands to lose GBP66 billion ($81.1 billion) a year in tax revenue in the event of a clean break with the European Union, or a "hard Brexit."

Opinion:Is this 'bone-chilling' indicator really saying 'sell' stocks? (http://www.marketwatch.com/story/is-this-bone-chilling-indicator-really-saying-sell-stocks-2016-10-11)

West Texas Intermediate crude futures pulled back slightly, trading at $51.28 a barrel (http://www.marketwatch.com/story/oil-prices-hover-near-highs-supported-by-view-opec-deal-may-happen-2016-10-11) on Tuesday, hovering near its highest level since July 15, 2015. Oil prices slipped after the International Energy Agency said production from the Organization of the Petroleum Exporting Countries rose to record highs in September. (http://www.marketwatch.com/story/opec-oil-production-rose-to-record-highs-iea-2016-10-11)

On Monday, oil rallied on bullish comments from Saudi Arabia's energy minister and Russian President Vladimir Putin. Major oil producers are meeting in Istanbul to try to lay the ground for a deal to cap production. Goldman Sachs warned clients that if a production deal isn't reached in Vienna next month, oil prices could plunge to $43 a barrel (http://www.marketwatch.com/story/why-goldman-sees-oil-dropping-to-43-if-opec-cant-get-a-deal-done-this-time-2016-10-11). (http://www.marketwatch.com/story/why-goldman-sees-oil-dropping-to-43-if-opec-cant-get-a-deal-done-this-time-2016-10-11)

(http://www.marketwatch.com/story/is-this-bone-chilling-indicator-really-saying-sell-stocks-2016-10-11)Economic reports and Fed speakers: There is no major economic data on tap Tuesday. Speaking in Australia Tuesday, Federal Reserve of Chicago President Charles Evans said the U.S. economy is on a sound footing and he wouldn't be surprised by December interest-rate hike, Dow Jones Newswires reported.

Minneapolis Fed President Neel Kashkari will speak at Bethel University on "Too big to fail" at 11 a.m. Eastern Time.

Stocks to watch:Yum! Brands Inc. (YUM) shares rallied 3.3% after it outlined plans to boost growth at its fast-food restaurants once the sale of units it owns in China are completed on Oct. 31. The owner of KFC, Pizza Hut and Taco Bell said it was reducing capital expenditures (http://www.marketwatch.com/story/yum-brands-unveils-plans-to-drive-growth-after-separating-china-business-2016-10-11) to $100 million by 2019 from a pro forma of $500 million in 2015.

(http://www.marketwatch.com/story/what-to-look-for-in-alcoas-earnings-2016-10-10)Read: Earnings recession expected to extend to sixth straight quarter (http://www.marketwatch.com/story/5-things-to-expect-this-earnings-season-2016-10-07)

Shares of Twitter Inc.(TWTR) rose 1.7%, after plunging 12% on Monday following a Bloomberg report said top bidders for the social network had dropped out.

Read:Twitter is the new Yahoo, so expect a long and bumpy ride (http://www.marketwatch.com/story/twitter-is-the-new-yahoo-so-expect-a-long-and-bumpy-ride-2016-10-10)

(http://www.marketwatch.com/story/twitter-is-the-new-yahoo-so-expect-a-long-and-bumpy-ride-2016-10-10)Samsung Electronics Co.(005930.SE) shares tumbled 8% in South Korea on Tuesday. The company has permanently halted the production and sale (http://www.marketwatch.com/story/samsung-kills-off-galaxy-note-7-smartphone-after-botched-recall-2016-10-11) of its Galaxy Note 7, amid reports of phones exploding and catching fire.

Apple Inc.(AAPL) shares rose 2%, after hitting their highest level of 2016 Monday after one analyst said the iPhone maker could sell millions of its own phones (http://www.marketwatch.com/story/apple-could-sell-another-15-million-iphones-because-of-samsungs-note-7-explosions-2016-10-10) on back of Samsung's woes.

Illumina Inc.(ILMN) shares cratered by 25% and were on track for the worst daily loss in five years, according to FactSet data, after the biotech company issued a revenue warning late Monday.

Other markets: European stocks (http://www.marketwatch.com/story/luxury-stocks-light-up-in-europe-but-oil-shares-lose-ground-2016-10-11) saw gains for luxury stocks, but losses for oil-related names. In Asia, the Nikkei rose nearly 1% on a weaker yen.

Gold prices slipped marginally, down $3.70 to $1,256.80 an ounce. Meanwhile, the yield on the 10-year Treasury note rose to 1.78%--its highest level in more than four months.

(END) Dow Jones Newswires

October 11, 2016 10:41 ET (14:41 GMT)