Automaker Ford - much like FedEx last week - gave a dire economic outlook, warning of a bigger-than-expected $1 billion hit from inflation and pushed delivery of some vehicles to the fourth quarter due to parts shortages.

Robert Schein is Chief Investment Officer at Blanke Schein Wealth Management.

"We're going to see more of that in the third quarter reporting from U.S. corporations. This is the perfect opportunity to throw the baby out with the bathwater, and get the opportunity to use all the negative information in your balance sheet. Ford's just one of many. We're going to see many more. But I think the pivot that we're going to have to see on corporate balance sheets is that hiring at least freeze or maybe even materialized layoffs that could actually help this labor tension going forward."

The Dow, S&P and Nasdaq all each lost about 1%.

All eyes will be on Fed Chair Jerome Powell Wednesday when he speaks after the Central Bank's policy meeting.

The Fed is widely expected to hike rates by 75 basis points for the third straight time, with markets also pricing in a 17% chance of a 100 basis point increase.

Ford's gloomy outlook caused its shares to sink more than 12%, its biggest one-day drop since 2011. Rival General Motors was also down more than 5%.

Shares of Gap dropped more than 3 percent. The retailer is eliminating about 500 corporate jobs as it struggles to protect margins and battles weak sales of outdated clothes at brands including Old Navy.

Meanwhile, in another sign of nervousness around future corporate earnings, Nike fell after it was downgraded by Barclays analysts to "equal weight" from "overweight," citing volatility in the Chinese market due to pressures from lockdowns in early September caused by the health crisis.