U.S. stocks skidded lower on Tuesday, extending the prior day's drop from last week's records, as investors braced for quarterly earnings and considered valuations.
"We're pushing the reset button a little bit here, as there is some nervousness waiting for the earnings season to really kick off. Certainly what investors are looking for is proof that the U.S. economy is going to pick up steam in the second half," said Chris Gaffney, senior market strategist at EverBank Wealth Management.
Given the market's recent reach to all-time highs, equities are unlikely to move higher "without a significant new catalyst, which will probably be second-quarter earnings reporting season, which gets started in earnest next week, but in practice tonight with Alcoa," said Art Hogan, chief market strategist at Wunderlich Securities.
Shares of the aluminum maker rose ahead of its expected release after the close.
"We'll wait and see if the reading on the earnings picture and the look ahead in terms of guidance in the second half is enough of a driver to hold onto the gains we've reached of late, and perhaps even drive us higher," said Hogan.
Small-cap companies were hit for a second session, with the Russell 2000 falling 1.2 percent, after Monday's 1.8 percent decline.
The Chicago Board Options Exchange Volatility Index, a measure of investor uncertainty, rose nearly a point, or 5.7 percent, to 11.98, after falling to "an astoundingly low 10.3 following Thursday's employment report," noted Andrew Wilkinson, chief market analyst at Interactive brokers.
Trading in VIX options on Tuesday suggests that rising volatility will abate, Wilkinson wrote in afternoon commentary.
"Volatility isn't necessarily a bad thing. We were at abnormally low levels, and everybody was saying, 'it's too calm,' so getting the VIX back up to more normal levels is not a real concern," said Gaffney.
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