Apple pared losses but still ended in the red after Nomura initiated coverage of the iPhone maker with a "neutral" rating and a price target of $710. Apple entered correction territory, trading down 10 percent from its all-time high. (Read More: Apple's Stock Is Down Over 10%—Time to Buy?)
Third-quarter earnings season kicks off with results from Dow component Alcoa after the closing bell. Analysts expect the aluminum producer to post a break-even quarter, according to data from Thomson Reuters. Yum Brands is also scheduled to post earnings.
Recent earnings warnings from large multinationals such as FedEx, Caterpillar and Hewlett-Packard have made investors cautious about corporate profits. (Read More:US Braces for Worst Earnings Season Since 2009)
Edwards Lifesciences plunged after the medical-device maker slashed its third-quarter revenue forecast.
Earlier, the IMF cut its global growth forecast for 2012 to its slowest since 2009. It warned U.S. and European policymakers that failure to fix their economic problems would prolong the slump, and forecast China's growth would weaken to 7.8 percent this year.
European shares ended loweras German Chancellor Angela Merkel made her first official visit to Greece, amid thousands of protestors, since the debt crisis erupted.
Spectrum Brands Holdings said it will buy a unit of Stanley Black & Decker that makes door locks and bath fixtures in a deal worth $1.4 billion.
RadioShack soared after the consumer-electronics retailer was upgraded to "buy" from "underperform" at Bank of America Merrill Lynch. Meanwhile, Netflix slumped after BofA downgraded the online movie streaming company to "underperform" from "buy."
On the economic front, small business sentiment dipped 0.1 point to 92.8 in September, weakening for the fourth time in five monthsas fewer owners expected to add staff and make capital investments, according to the National Federation of Independent Business.
The government auctioned $32 billion in 3-year notes at ahigh yield of 0.346 percent and bid-to-cover of 3.96. The bond market was closed on Monday in observance of the Columbus Day holiday.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
WEDNESDAY: Weekly mortgage apps, wholesale trade, 10-yr note auction, Beige Book, Treasury budget, Wal-Mart investors mtg; Earnings from Costco
THURSDAY: International trade, jobless claims, import/export prices, oil inventories, 30-yr bond auction
FRIDAY: PPI, consumer sentiment, GM resumes Volt production; Earnings from JPMorgan, Wells Fargo
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