U.S. stocks plunge following European markets

U.S. stocks tumbled in the morning session Tuesday as the rout in European equity markets weighed on Wall Street sentiment.

By midday, the Dow Jones Industrial Average shed 272.59 points, or 1.65 percent, to 16,237.60. The S&P 500 dropped 33.31 points, or 1.69 percent, to 1,933.66. The Nasdaq Composite Index sank 100.88 points, or 2.09 percent, to 4,728.08.

European shares traded drastically lower Tuesday, with Germany's benchmark DAX index at the Frankfurt Stock Exchange diving over 3 percent, as a result of Volkswagen's emissions scandal.

The German carmaker on Tuesday revealed that a total of 11 million diesel cars may have been involved in the emissions-testing manipulations.

The company also said in a statement that it had set aside 6.5 billion euros (7.3 billion U.S. dollars) to cover the costs of the issue.

The company's shares continued to plummet Tuesday, losing 20 percent during the trading, on news that it could face an 18-billion U.S. dollars fine in the U.S. for rigging emission tests on its diesel vehicles.

Meanwhile, uncertainty about the timing of interest rate hikes by the U.S. Federal Reserve also dampened investor sentiment.

The U.S. central bank held its benchmark rate near zero after concluding its two-day monetary policy meeting Thursday. Most Fed officials, however, still expect a rate increase this year, the first in nine years.

On Monday, U.S. stocks pared part of early gains to end higher as investors meditated on the U.S. existing-home sales. Endit