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Stocks fall; Ukraine concerns overtake earnings cheer

U.S. stocks declined on Tuesday, pulling the Dow under 17,000, as the United States and European Union joined in expanding sanctions against Russia, highlighting a geopolitical crisis that overrode investor enthusiasm for earnings from corporations including Merck & Co.

"Investors are clearly hyper-sensitive right now to things happening in Europe and Russia, and whether it's worsening or not," said Dan Greenhaus, chief global strategist at BTIG.

In a statement televised live Tuesday afternoon, President Barack Obama said the United States was expanding on measures announced two weeks ago, targeting Russian energy, defense and financial sectors as Russia has continued to support separatists in the Ukraine, and was still building up forces on its own border with Ukraine.

Obama's statement followed European Union governments that announced sanctions earlier in the day to reduce Russia's ability to tap into bank financing and advanced technology.

The sanctions, the most expansive so far over Russia's support of rebels fighting in Eastern Ukraine, triggered what Greenhaus called a "knee-jerk" reaction to headlines related to the crisis in the Ukraine, with Wall Street erasing gains that came with another round of largely better-than-expected corporate results.

Merck gained after the drug manufacturer reported better-than-expected quarterly results, with Pfizer also rising after posting earnings that beat estimates.

United Parcel Service, however, disappointed with the shipper's quarterly profit more than halved.

Read More UPS profit hit by retirement liabilities

Twitter jumped in after-hours trading as the social-media company easily beat earnings and revenue estimates.

"We're continuing to go up on the back of earnings; we had some good reports," said Jim Dunigan, managing executive, investments, at PNC Wealth Management, speaking before the latest round of sanctions targeting Russia were announced.

Windstream Holdings led a surge in phone shares on its plan to spin off some telecommunications network assets into a publicly-traded real estate investment trust; Frontier Communications and CenturyLink jumped; as did Dow components AT&T and Verizon Communications.

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After a nearly 74-point climb that lifted it above 17,000, the Dow Jones Industrial Average fell 70.48 points, or 0.4 percent, to 16,912.11.

The S&P 500 declined 8.96 points, or 0.5 percent, to 1,969.95, with industrials hardest hit and telecommunications the sole sector to remain positive among the S&P's 10 major industry groups.

The Nasdaq shed 2.21 points, or 0.1 percent, to 4,442.68.

For every two shares rising, three fell on the New York Stock Exchange, where nearly 628 million shares traded. Composite volume neared 3.2 billion.

On the New York Mercantile Exchange, the cost of crude fell 70 cents, or 0.7 percent, to $100.97 a barrel, while gold futures dropped five bucks, or 0.4 percent, to to $1,298.30 an ounce.

The dollar held steady against the currencies of major U.S. trading partners; the yield on the 10-year Treasury yield fell 2 basis points to 2.462 percent.

Traders work on the floor of the New York Stock Exchange (NYSE) on Friday.
Spencer Platt / Staff | Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) on Friday.

The Conference Board's measure of consumer confidence came in Tuesday at 90.9 in July, the highest reading since October 2007.

Read MoreConsumers see better days ahead

U.S. single-family home prices climbed more than expected in May, although the pace of monthly increases showed signs of slowing, according to the S&P/Case-Shiller composite index of 20 metropolitan cities.

"With income growth running at about 2 percent, double-digit home-price gains were unsustainable and we should be cheering slower home-price gains, not fearing them, because it is the main factor that will entice the newly created household to consider buying instead of renting," Peter Boockvar, chief market strategist at the Lindsey Group, wrote in emailed commentary.

Read MoreUS metro home prices climb 1.1 percent in May

The Fed's regular monetary policy announcement is due on Wednesday, with the central bank expected to cut monthly asset purchases by another $10 billion to $25 billion. U.S. second-quarter gross domestic product figures will also be announced during the day.

Read More Wall Street worries Fed's easing will 'end badly'

Read MoreThe Fed could start raising rates sooner than many think

On Monday, stocks finished little moved, with the Dow coming back from a one-month low, as investors looked to economic reports, earnings and the Fed's mid-week policy decision.

Read MoreStocks little changed; earnings, data and Fed ahead

—By CNBC's Kate Gibson

Coming Up This Week:

Wednesday

Earnings: Barclays, British American Tobacco, Goodyear Tire, SodaStream, Southern Co, Phillips 66, Thomson Reuters, Nextel, Valero Energy, Tesoro, Hess, Humana, AllianceBernstein, Booz Allen Hamilton, Carlyle Group, Samsung, Kraft Foods, Whole Foods, MetLife, Yelp, Weight Watchers, Shutterfly, Taubman Centers, AMC Entertainment, Boston Beer, Murphy Oil, Cabot, Western Digital, Whiting Petroleum, Agnico Eagle Mines, Allstate, Akamai, Hartford Financial

7:00 a.m. Mortgage applications

8:15 a.m. ADP

8:30 a.m. Q2 GDP

8:30 a.m. PCE Q2

11:30 a.m. 2-year floating rate note auction

1:00 p.m. $29 billion 7-year note auction

2:00 p.m. Fed statement

Thursday

Earnings: Exxon Mobil, Conoco Phillips, Diageo, Occidental Petroleum, Royal Dutch Shell, Public Storage, Siemens, MasterCard. A-B InBev, AstraZeneca, Sanofi, Tesla, Expedia, GoPro, LinkedIn, Time Warner Cable, Alcatel-Lucent, Apache, Teva, Delphi Automotive, Ball Corp, Becton Dickinson, CME Group, Hyatt, Colgate-Palmolive, Kellogg, Marathon Petroleum, Mosaic, Newell Rubbermaid, McKesson, PG&E, Sony, Avon Products, Beazer Homes, Fortress Investments, Scana, Generac, DirecTV, 3-D Systems, SunPower, Seattle Genetics

8:30 a.m. Jobless claims

8:30 a.m. Employment cost index, 2Q

9:45 a.m. Chicago PMI

Friday

Earnings: Procter and Gamble, Chevron, CBOE, Axa, Calpine, Clorox, ArcelorMittal, Weyerhaeuser

Monthly vehicle sales

8:30 a.m. Employment report

8:30 a.m. Personal income and spending

9:55 a.m. Consumer sentiment

10:00 a.m. ISM Manufacturing

10:00 a.m. Construction spending

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