U.S. stocks fell Tuesday after disappointing results at blue-chip companies like Microsoft Corp. and Caterpillar Inc. sparked concerns about the strong dollar’s drag on earnings growth. 
 
 Earlier in the session, the Dow Jones Industrial Average was down as many as 390 points, but in afternoon trading stocks pared some losses. 
 
 In recent trading, the Dow dropped 234 points, or 1.3%, to 17445. The S&P 500 declined 19 points, or 0.9%, to 2038, and the Nasdaq Composite lost 60 points, or 1.3%, to 4711. Meanwhile, the Russell 2000 index, the widely followed benchmark of small-cap U.S. companies, was down 0.2%. 
 
 Microsoft and Caterpillar contributed about 67 points to the Dow’s total decline. Microsoft shares fell 8.5% after the company set its financial forecast for the fiscal year, which ends in June, below Wall Street estimates, citing the strong U.S. dollar. 
 
 Caterpillar gave a disappointing 2015 outlook, citing tumbling oil, copper and coal prices, and reported fourth-quarter earnings that missed expectations. A stronger dollar is also hurting sales, the company said. Shares dropped 7.5%. 
 
 ENLARGE Microsoft shares were hit after the company forecast lower-than-expected earnings because of the strong U.S. dollar. Above, CEO Satya Nadella in October. Photo: Reuters 
 
 The surge in the U.S. dollar has helped drive current earnings season’s tepid outlook. The drop in oil prices and weak economic activity overseas are also contributing to low expectations. 
 
 Going into fourth-quarter earnings season, analysts polled by FactSet had expected earnings to rise 1.1% from a year earlier, which would mark the slowest quarterly pace of growth since the third quarter of 2012. Including 102 companies that have reported, the S&P 500 is on track to see earnings inch up 0.1% from a year earlier. 
 
 “This earnings season is starting to validate that these really big companies will start to see more headwinds,” said Andrew Slimmon, who oversees about $4.3 billion as managing director of Morgan Stanley Wealth Management’s Global Investment Solutions. “The stronger dollar is going to hurt big U.S. companies.” 
 
 Concerns about a strong U.S. currency are driving some investors to small-cap stocks. The sector lagged behind the broader market in 2014, with the Russell 2000 index ending the year up 3.5% compared with the S&P 500’s 11.4% rise. But with the strengthening U.S. dollar hurting multinational companies’ profits, some money managers say now may be the time to move money into small-cap names. 
 
 “U.S. small caps tend to do most of their business in the U.S., meaning they’re not as exposed to the stronger dollar,” said David Lebovitz, global market strategist for J.P. Morgan Asset Management, which manages $1.7 trillion. He added that some of these companies use imports to make their products, so the strong dollar could actually help their bottom line. 
 
 “There’s probably an opportunity in those more domestically-focused companies,” he said. 
 
 In the past week, the Russell 2000 has gained 2.4%, compared with the S&P 500’s 0.7% rise. 
 
 Several traders said market activity was heavier than they expected given the snowstorm that blanketed the New York City area and kept many in the city’s financial community at home. New York Stock Exchange operator NYSE Group Inc. invoked the rarely used “Rule 48,” which relaxes some trading rules in a bid to ensure a smooth opening to trading. 
 
 “I thought it would be dire today,” said Michael Antonelli, a sales trader at the Milwaukee office of investment bank Robert W. Baird. “I thought it would feel like a holiday today given a component of people being out. But with this incredible earnings action, markets are not dead by any stretch.” 
 
 “We’re on track for a normal day,” he said. 
 
 In other earnings news, Procter & Gamble Co. said Tuesday it expects currency volatility to reduce its 2015 sales by 5% and profit by 12%. Shares declined 3.7%. 
 
 Kent Engelke, chief economic strategist at Capitol Securities Management, Inc., said he has cut his forecast for profit at multinational companies because of the dollar’s strength. The dollar could get another boost if the Federal Reserve signals it remains on track to raise interest rates this year, he added. 
 
 The Fed begins its two-day monetary policy meeting on Tuesday and is scheduled to release a statement on Wednesday. 
 
 “If the Fed raises rates, the dollar should continue to rally, and that will impact profits negatively,” Mr. Engelke said. 
 
 U.S. economic data Tuesday also helped sour investor sentiment. The Commerce Department said orders for durable goods fell 3.4% in December from November. Economists surveyed by The Wall Street Journal had expected orders to climb 0.3%. 
 
 Declines in European stocks added to the negative tone. Nervousness about a potential showdown between Greece’s new government and its international creditors continued to grip Greek financial markets Tuesday, with stocks and bonds extending their postelection losses. The Stoxx Europe 600 fell 1%. 
 
 Assets considered havens rose Tuesday. Gold futures added 0.9% to $1290.80 an ounce. The yield on the 10-year Treasury note fell to 1.795% from 1.830% on Monday. Yields fall as prices rise. 
 
 In other markets, crude-oil futures rose 1.6% to $45.87 a barrel. 
 
 —Dan Strumpf contributed to this article. 
 
 Write to Corrie Driebusch at corrie.driebusch@wsj.com and Saumya Vaishampayan at saumya.vaishampayan@wsj.com a ||||| U.S. stocks closed lower Friday with the S&P 500 and the Dow Jones Industrial Average turning red for the year as doubts about whether equities can count on support from corporate earnings emerged in the wake of disappointing results from a handful of megacap companies. 
 
 How did major benchmarks fare? 
 
 After falling more than 500 points earlier, the Dow Jones Industrial Average DJIA, +0.68% trimmed losses to drop 296.24 points, or 1.2%, to 24,688.31. The S&P 500 SPX, +0.63% fell 46.88 points, or 1.7%, to 2,658.69. The Nasdaq Composite Index NQZ8, +0.29% retreated 151.12 points, or 2.1%, to 7,167.21. 
 
 For the week, the Dow is off 3%, the S&P 500 3.9% and the Nasdaq is down 3.8% while for the month of October so far, the S&P has lost 8.8%, the Dow is down 6.7%, and the Nasdaq has shed 11%. Friday’s downdraft also pulled the S&P 500 and the blue-chip index into the red for 2018. The Nasdaq is still up 3.8% year-to-date although the tech-heavy benchmark entered correction territory on Wednesday, when it closed more than 10% below its recent highs. 
 
 Read: The global selloff has erased $5 trillion from stock and bond markets in October 
 
 What drove the market? 
 
 Investors were wary ahead of the weekend amid persistent worries about slowing global growth, rising interest rates and concerns that companies have seen peak earnings growth. 
 
 Not helping the mood was disappointing results from big corporations. Amazon.com Inc. AMZN, +0.92% posted a record profit but sales disappointed, and more important, its forecast for fourth-quarter sales — the all-important holiday shopping period — was below analysts’ expectations. 
 
 Trade worries were also simmering after U.S. officials reportedly said talks with China won’t resume until Beijing comes up with solid proposals over forced technology transfers and other economic issues. 
 
 Which data were in focus? 
 
 The Commerce Department reported that the U.S. economy grew 3.5% in the third quarter, beating forecaster estimates of 3.4%. Second-quarter growth held at 4.2%. 
 
 The University of Michigan’s consumer sentiment index came in at 98.6, below the consensus estimate of 99. 
 
 What were analysts saying? 
 
 Alec Young, managing director of global markets research at FTSE Russell, said that the declines were sparked by disappointing quarterly reports from Amazon and Alphabet Inc., but the bigger concern is where the global economy is headed in 2019. “All the macro issues, from higher interest rates to slowing growth in China are giving us a half-glass-empty situation regarding 2019 earnings,” he told MarketWatch. 
 
 The speed and magnitude of the declines, he argued, is also a concern. “This is a dangerous time, a fluid time, and the market looks like a falling knife, and so were looking at a buyer’s strike,” he said, in which investors retreat for the sidelines and wait for the market to bottom out. 
 
 “The market’s mood swings have been unsettling, but the underlying conditions that triggered the rout are unlikely to shatter the economic or earnings cycles. We think this will all sort out, but it will take some time,” said Kelly Bogdanova, vice president of portfolio advisory group at RBC Wealth Management, in a note. 
 
 See: Here’s a reminder that stock-market corrections don’t always become bear markets 
 
 Which stocks are in focus? 
 
 Amazon.com AMZN, +0.92% shares are down 7.8% after the retailer lowered its guidance for holiday sales figures. 
 
 Alphabet Inc. GOOGL, +1.31% shares slid 1.8% after the search-engine giant beat on earnings but fell short on revenue target. 
 
 Intel Corp. INTC, -0.88% shares rose 3.1% after the company’s quarterly results and outlook beat analyst estimates. 
 
 Share of Expedia Group Inc. EXPE, -1.47% gained 2.5% following the release of quarterly results that surpassed Wall Street expectations. 
 
 Charter Communications Inc. CHTR, -0.83% shed 6.3% following the release of revenue numbers the fell short of analysts’ estimates. 
 
 How were other markets trading? 
 
 Asian stocks fell, led by a 1% drop for the Hong Kong Hang Seng Index HSI, +0.04% and a 0.8% fall for the Nikkei 225 index NIK, +1.23% European markets struggled as well. 
 
 The yen USDJPY, +0.02% and gold prices GCZ8, +0.14% were higher, indicative of investors seeking out perceived safer havens and oil prices CLZ8, -0.48% were stronger. 
 
 —Barbara Kollmeyer contributed to this report 
 
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– It's a miserable day on Wall Street so far, with the Dow plunging more than 370 points about an hour after the open. MarketWatch says one of the driving factors is a weak report on durable-goods orders, which suggests that businesses are worried about a slowdown rather than investing in growth. Also not helping: disappointing quarterly results from a slew of blue-chip companies, reports the Wall Street Journal. The Nasdaq and S&P 500 were down 2.2% and 1.7% respectively.