U.S. stocks fell Tuesday as weakness in the supply chain system for personal computers weighed on Intel and Microsoft while signs of tapering demand in China weighed on materials stocks including Alcoa.

The Dow Jones Industrial Average dropped 54.50 points, or 0.51%, to 10644.25, its biggest one day drop since July 21.

Intel (Nasdaq) was the measure's worst performer with a drop of 83 cents, or 4%, to 19.82, after Baird cut its investment rating on the stock to neutral from outperform, saying PC-related orders have recently dropped sharply and inventories of memory chips are piling up.

The warning weighed on other technology companies reliant on demand for PCs, including Microsoft (Nasdaq), which fell 54 cents, or 2.1%, to 25.07.

Alcoa was also weak, down 31 cents, or 2.7%, to 11.35, as investors worried that demand may be waning for metals and other materials following a weaker than expected increase in Chinese imports.

The Nasdaq Composite dropped 28.52, or 1.24%, to 2277.17. The Standard & Poor's 500 index slipped 6.73, or 0.60%, to 1121.06.

The technology sector led the slump, while defensive sectors including utilities, consumer staples and health care rose. The declines came as Federal Reserve officials moved to prevent the central bank's huge balance sheet from shrinking, an attempt to spur the U.S. economy's recovery and avoid deflation.

At the end of a policy meeting Tuesday, Fed officials said they would reinvest the proceeds from maturing mortgage backed securities into U.S. Treasurys, in a move aimed at kick starting the economy by helping to keep borrowing costs low.

European market

European shares ended lower Tuesday, as weaker-than-expected import data from China and anxiety ahead of the Federal Reserve's policy statement encouraged traders to sell equities. The Stoxx Europe 600 index fell 0.9% to 259.93 points after gaining 1.4% on Monday.

Investors are awaiting the U.S. Fed's announcement to see if central bankers decide to take new measures to stimulate economic growth.

Ahead of that decision due after the European close Tuesday data from China showed a wider than expected trade surplus in July with a 38.1% hike in exports and a smaller than expected 22.7% rise in imports.

China is the biggest customer of many mineral extractors. Shares of miner BHP Billiton fell 2.3% and Xstrata shares slipped 3%.

Of the major regional European benchmarks, the French CAC-40 index declined 1.2% to 3,730.58 points and the German DAX index fell 1% to 6,286.25.

Asian market

Chinese shares suffered their worst fall in more than a month Tuesday, dragging on markets across Asia, after weaker than expected import data in July, while concerns ahead of U.S. Federal Reserve's policy meeting weighed sentiment.

The Shanghai Composite dropped 2.9%, its worst percentage fall since June 29, while the Shenzhen Composite index tumbled 3.3%.

Hong Kong shares also responded in kind, with the Hang Seng Index finishing 1.5% lower for its second loss in 16 trading days. Japan's Nikkei Stock Average dropped 0.2% and South Korea's Kospi lost 0.5%.

The official data showed China's real estate prices remain stubbornly high, dashing hopes of a potential policy easing. Poly Real Estate shed 2.7% while China Merchants Bank dropped 3.1%.

Commodities and metals

Base metals on the London Metal Exchange ended lower Tuesday on a stronger dollar and poor economic data out of China and the U.S. Copper and aluminum fell to their lowest this month, with copper ending 1.6% lower and aluminum down 0.5%.

An unexpected drop in U.S. productivity in the second quarter, coupled with lower than expected growth in Chinese imports, added to worries that the global economy's recovery is slowing.

Volumes were very low as physical demand has dropped due to the annual summer lull, leaving the market to be dominated by day traders, said a senior trader in London. Standard Bank said the metals appear to be struggling to find direction after having rallied over the past two weeks.

Crude futures pared early losses Tuesday, managing to again settle above $80 a barrel after the Federal Reserve said it would take additional measures to stimulate the U.S. economy.

Light, sweet crude for September delivery settled down $1.23, or 1.5%, lower at $80.25 a barrel on the New York Mercantile Exchange, after falling as low as $79.20 earlier in the session.

Brent crude on the ICE futures exchange settled $1.39 lower at $79.60 a barrel. Gold futures rose in after hours activity after the Federal Reserve announced a stimulative portfolio shift and left its benchmark rate unchanged as concerns persist about the viability of the economic recovery.

The most actively traded contract, for December delivery, rose $6.10, or 0.5%, to $1,208.70 in electronic activity after the settlement on the Comex division of the New York Mercantile Exchange. Gold had settled down $4.60, or 0.4%, to $1,198 an ounce.