European shares tumbled to close a three-month lows after Italy's election resulted in deadlock, with no party gaining sufficient seats to win a majority in the country's upper house. Analysts warned a government stalemate in the euro zone's third-largest economy would make it even harder to pass key legislation needed for structural and fiscal reforms. The euro plunged near a seven-week lowagainst the U.S. dollar.
(Read More: Why Italy's Stalemate Could Mean Chaos for Euro Zone)
"It was the worst possible outcome, feared by market participants and European policy-makers alike," said Tobias Blattner, European economist at Daiwa Capital Markets. "Italy is facing Greek-style political gridlock and possibly new elections."
JPMorgan dipped after the banking giant said it announced plans to save $1 billion in 2013 through various costs cuts and about 4,000 job reductions.
Meanwhile, Best Buy announced it will cut approximately 400 workers at its headquarters, related to a larger restructuring move announced last November. Earlier, UBS lifted its price target on the firm to $18 from $12.50. The consumer electronics retailer is scheduled to post earnings on Friday.
Apple gained amid speculation the iPhone maker could announce plans to enhance shareholder value at its shareholder meeting on Wednesday. The stock has plunged more than 35 percent since hitting an all-time high of $705 back in September. Apple has been trading below its 50-day moving average for nearly five months.
Among earnings, Home Depot soared to lead the Dow gainers after the home improvement retailer posted results that topped expectations. The company also announced it would buy back as much as $17 billion of its own shares, and raise its dividend 35 percent to 39 cents from 29 cents a share. On Monday, rival Lowe's topped Wall Street expectations, with sales benefiting from rebuilding after Superstorm Sandy.
Macy's rose after the department store retailer reported quarterly results that exceeded Wall Street expectations.
Tivo, Dreamworks Animation and Priceline.com are among notable companies scheduled to post earnings after the closing bell.
The government auctioned $35 billion in 5-year notes at a high yield of 0.78 percent. The bid-to-cover ratio, an indicator of demand, was 2.85.