With no major economic news, investors have been focusing on when the Federal Reserve will start scaling back stimulus effort. The yield on the 10-year Treasury note slipped near 2.83 percent after hitting a fresh two-year high of 2.90 percent on Monday.
"If you buy bond funds now, you're guaranteed to lose money whereas if you buy stocks, you still have a chance to make money," said Dan Veru, CIO of Palisade Capital Management. "We're going through this adjustment period of rates coming back up and that process can sometimes create headwinds for the market. And given we had no significant pullbacks for the market this year, we could be vulnerable to some setbacks."
Global markets took a hit from worries about reduced Fed stimulus. European markets were lower across the board.
In Asia, emerging market stocks extended their sharp losses. Indonesia's Jakarta Composite fell nearly 5 percent, placing it in bear market territory, having lost approximately 22 percent from May's all-time record high. And Thailand's benchmark SET Index dropped nearly 3 percent.
(Read more: First India, then Indonesia... who is next?)
Japan's Nikkei closed at a near two-month low and China's Shanghai Composite fell 0.6 percent.
"The market did an excellent job of ignoring the overseas market damage this morning," wrote Elliot Spar, market strategist at Stifel Nicolaus. "If the market can have strong close today, my upside target is the gap at 1,685 on the S&P. We really don't want to get there too fast. Many damaged sectors and names need time to repair themselves. A rally in the S&P back to the recent high at 1,709 that is accompanied by numerous negative divergences would not be healthy for the market."