Stocks extended losses as the closing bell neared, pulling back from last week's rally to two-year highs, as the dollar rose.
The Dow Jones Industrial Average was down more than 90 points after slipping in the previous session.
Bank of America and Kraft led the blue-chips lower, while Exxon Mobil and Microsoft rose.
The S&P 500 Index and the Nasdaq both declined. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded above 18.
Among key S&P sectors, financials, consumer discretionary stocks, and materials fell, while telecom and energy rose.
The dollar rose against a basket of currencies, as the euro fell over nervousness about high levels of sovereign debtin euro zone countries, including Ireland, Portugal and Span. That helped to push materials stocks lower. Stocks overall have been moving inversely to the dollar.
Gold, however, rose near $1,420 an ounce, climbing for the fourth straight session. And silver touched a 30-year high, rising almost 17 percent in the last week, before paring some gains. The Chicago Mercantile Exchange on Tuesday afternoon raised margin costs for silver.
"It's a way for the exchange to try to stop at some level speculation into the market," Rick Bensignor of Execution Noble said on CNBC.
Shares of gold miners such as Barrick Gold and AngloGoldAshanti climbed more than 3 percent, while materials stocks, Vulcan Materials ,Cliff's Natural Resources , and Newmont Mining sank.
Meanwhile, oil prices resumed gains to hit a fresh two-year high above $87 a barrel.
Monday's lackluster market activity was most likely a pause after stocks reached two-year highs last week. One technical reason for the pause could be that the S&P 500, which traded as high as 1,226 on Tuesday, was closing in on 1,228, which represents "a 2/3 retracement of the entire bear market dating back to fall 2007," according to Michael Sheldon, chief market strategist at RDM Financial Group.
Also, the Relative Strength Index for the S&P, an indicator of whether the market is overbought or oversold, is at 70, "which may indicate a pause or brief correction," Sheldon said.
Moreover, Sheldon thinks the market will continue to move higher.
"I think the impact of QE2 (quantitative easing) combined with the election last week and the somewhat better than expected employment data on Friday, have continued to provide a positive backdrop for equity markets," he said. "Heading into year-end, you could easily have investors pile into the market especially those who may be under invested or who have missed the majority of the recent rally off the summer lows."
On the M&A front, Yahoo jumped following a report it may be a takeout target. It's unclear whether the private equity investors were involved in a deal that AOL was said to be considering.
Atlas Energy soared more than 30 percent after news Chevron would buy the natural gas producerfor $4.3 billion, including debt, giving it a stake in the Marcellus shale fields.
And Sara Lee has agreed to sell its North American bakery business to Grupo Bimbo for $959 million. The food producer also reported weak profit for the quarter.