By Jonathan Cheng 
 

U.S. stocks sank in late trading as a drop in commodities prices added to concerns about policymakers' ability to contain Europe's debt crisis.

The Dow Jones Industrial Average fell 92 points, or 0.8%, to 11099. The Standard & Poor's 500-stock index lost 14 points, or 1.2%, at 1162, while the Nasdaq Composite shed 29 points, or 1.1%, to 2518.

A decline would snap the stock market's three-day winning streak, coming after a day that saw a major gain evaporate in the closing minutes of trading. On Wednesday, the Dow shot up more than 125 points in early trading before turning negative.

The moves came on a day when Finland voted to approve changes to the euro-zone bailout fund, after leaders raised concerns earlier this month that they would demand collateral as a precondition for participation. Germany votes on the changes Thursday. The changes need to be approved by all 17 euro-zone members to take effect.

"Whenever the stock market is driven more by emotions and hope than fundamentals, you're likely to see sentiment change quickly," said Kate Warne, investment strategist for retail-investor brokerage firm Edward Jones in St. Louis.

She said that investors remained worried about policymakers in Europe, who were still struggling to keep up with the debt crisis. "What we've continued to see for the past year and a half is the policymakers have lagged the market concerns, and that could continue to be the situation," Ms. Warne said.

Italy's business confidence index plummeted in September in response to slowing global demand and after the government announced tax-heavy austerity measures to fix public finances, with the reading suffering its biggest monthly drop since the fall of 2008.

Stocks in Europe finished near the lows of the day. The Stoxx Europe 600 fell 1.1%, while the French CAC-40 index lost 0.9%. Asian bourses were mixed, with Japan's Nikkei Stock Average edging up 0.1% but China's Shanghai Composite shedding 1%.

"Coming out of recessions, it's always very confidence-driven ... The longer this goes on, the more this dents consumer confidence and business confidence, and that creates a negative feedback loop which impacts the economy," said Christopher Blum, who manages J.P. Morgan Asset Management's Intrepid Value Fund. "There's not a lot of time in my mind to reverse the negative course, but it looks as if the politicians aren't in a big rush to solve this."

Dragging on the downside Wednesday were materials stocks. Alcoa fell 4.4% to lead the Dow decliners as the prices of some commodities faltered. Alpha Natural Resources and Cliffs Natural Resources were two of the biggest losers on the S&P 500, dropping 10% and 8.1% respectively.

Copper prices dropped 5.6%, bringing its September losses to 23%. Crude oil tumbled 3.8% to $81.21 a barrel. Gold futures fell 2.1% to about $1,616.30 an ounce.

In economic headlines, durable-goods orders during August slipped 0.1%, the second drop in three months as manufacturers struggled with the tough economy, disappointing hopes for a 0.2% rise. The drop followed a 4.1% surge in July and a 1.1% decline during June.

The number of mortgage applications filed in the U.S. last week rose 9.3% from the prior week, as interest rates continued to slide following the Federal Reserve's latest stimulus measure. Refinance activity climbed 11%.

The dollar rose against the euro but fell against the yen, while the yield on the 10-year Treasury rose to 2.004%.

Among other stocks, Amazon.com climbed 3.9% after the online retailer unveiled its Kindle Fire tablet, which is to compete with Apple's iPad. Apple inched up 0.2%, while Barnes & Noble, which owns the Nook e-reader that competes with another version of the Kindle, fell 4.2%.

Jabil Circuit surged 9.3% to lead S&P 500 components after the electronics contract manufacturer reported a big gain in profit and issued a stronger-than-expected forecast.

Family Dollar Stores slipped 0.2% after the discount retailer approved a buyback of up to $250 million of its common stock.

Accenture gained 0.9% after the outsourcing and consulting company topped earnings and revenue estimates and provided a favorable outlook.

Paychex rose 2% after the payroll services company topped fiscal first-quarter earnings and revenue estimates, and affirmed its full-year outlook.