In a busy day for retail earnings, Target posted quarterly results that topped expectations for the holiday quarter. But shares gave up their initial gains amid investor concern over the company's ability to reach its forecast, given its large-scale expansion plans in Canada.
Dollar Tree rallied after the discount retailer posted earnings and revenue that edged past expectations.
And TJX reported quarterly results that beat Wall Street expectations. In addition, the company announced a dividend hike and a new share repurchase program.
Coach jumped amid unconfirmed reports that the upscale retailer is exploring a sale of itself. Separately, the retailer said it has hired a former Nike executive to oversee the transformation of its stores.
European shares pared gains iafter an Italian bond auction saw yields for Italy's 10-year debt reach their highest levels since October 2012. The country's general election this week saw no political party gain a parliamentary majority, raising the risk of prolonged instability.
(Read More: How Investors Can Play the Italian Panic)
Tobias Blattner, a euro zone economist at Daiwa Capital Markets, saw little grounds for optimism regarding Italy.
"Even if a Bersani minority-led government or a grand coalition between Berlusconi and Bersani ultimately emerges from the elections, it will be a weak government that is unlikely to survive for long as the experience of the past year (decades) or so suggests. So, what seemed to have emerged as the smallest common denominator – to avoid new elections – looks ultimately inevitable to us," Blattner wrote in a note.
However, global market sentiment was boosted by Federal Reserve Chairman Ben Bernanke's speech on Tuesday, which helped soothe fears the Fed might end its asset purchases earlier than forecast.
In his semi-annual report to the Senate Committee, Bernanke said the Fed will continue its quantitative easing (QE) program until clear signs of an economic recovery are visible.
(Read More: Bernanke: My Inflation Record Is One of the Best)
"There was little in the way of surprise yesterday by Chairman Bernanke who, as expected, gave a stern defense of QE as an important monetary policy tool in the current crisis," wrote Derek Halpenny, European head of global markets research at the Bank of Tokyo-Mitsubishi.
Bernanke also urged lawmakers to avoid the sharp spending cuts due to bite at the beginning of March, which he warned could create a "significant headwind" for the economic recovery when combined with earlier tax increases. (CNBC Explains: Sequester)
Also on the economic front, the National Association of Realtors will release pending home sales for January at 10 am ET.
The Treasury will auction $29 billion of 7-year notes, with results available shortly after 1pm ET.
Earlier in the day, Anheuser-Busch Inbev forecast a weak start to the year in the U.S. and Brazil, after posting slightly lower-than-expected earnings in the fourth quarter of 2012. The Belgian brewer is the world's biggest beer maker and produces Budweiser and Stella Artois.
Meanwhile, Franco-German defense firm EADS predicted higher profits in 2013 as it confirmed an upswing in 2012, driven by efforts to cut costs, and strong deliveries of passenger jets. EADS shares rose by around five percent on the news. U.S. rival Boeing posted results in January that also topped expectations.