Stocks accelerated their losses in the final hour of trading to finish near session lows Tuesday, dragged by techs and weighed by ongoing worries about efforts in Washington to resolve the looming "fiscal cliff."
The Dow Jones Industrial Average dropped 58.90 points, or 0.46 percent, to finish at 12,756.18, led by Microsoft and Intel. Home Depot was the biggest blue-chip gainer, but the home improvement retailer still ended off its highs.
The S&P 500 declined 5.50 points, or 0.40 percent, to end at 1,374.53.
The Nasdaq fell 20.37 points, or 0.70 percent, to close at 2,883.89. The Nasdaq briefly dipped into correction territory, earlier in the session, falling 10 percent from its Sept. 21 high.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended above 16.
Among the key S&P sectors, techs and banks dragged, while utilities nded higher.
U.S. equities have come under pressure since last week's presidential election as investors worry that if no deal is reached to prevent the automatic spending cuts and tax increases that hit at the end of the year, the economy could slip into recession. (Read More: Who Ultimately Wins From the 'Fiscal Cliff'?)
"This slope downward over the last three weeks is telling us that [the market is] concerned, but not panicked," said Jim Iuorio, director of TJM Institutional Services. "It's in a slow sluggish spot waiting to hear from [Washington], but we won't hear from them for a while."
Fiscal cliff uncertainty is also restraining banking activity , Bank of America CEO Brian Moynihan said on Tuesday.
"We've got a generation of zombie consumers that are haunting the landscape in the United States," Stephen Roach, Yale University senior fellow, said on CNBC Tuesday. "What the consumption weakness shows you is the economy doesn't have a cushion, so when you hit an economy without a cushion with sharp fiscal consolidation we'll go immediately into recession."
Among earnings, Home Depot beat earnings expectations and raised its full-year outlook as the housing market continues to show signs of improvement.
TJX rose after the parent company of Marshalls and TJMaxx posted earnings that edged past estimates.
Dick's Sporting Goods posted earnings that topped expectations and said same-store sales jumped 5.1 percent.
Saks, meanwhile, forecast that Hurricane Sandy will lead to flat same-store sales in the current quarter, adding that stores affected by the storm account for more than half its sales. Still, shares edged higher.
Xerox edged higher after the photo copier manufacturer announced plans to raise its dividend next year and hike its share buyback program by $1 billion. It will also take a $100 million charge related to a previously announced restructuring.
Meanwhile, Microsoft slumped after the tech giant said Steven Sinofsky, the executive most widely tipped to be the next chief executive has left the company.
Also among techs, Facebook slipped, pulling back after rallying more than 4 percent in the previous session, ahead of the social-networking giant's lockup expiration Wednesday, where about 800 million shares will become eligible for sale.
Cisco s slated to post earnings after the closing bell.
On the economic front, the budget deficit rose to $120 billion in October, bigger than forecasts for a $114 billion gap and up from $98 billion in the same period last year.
Growth in expenditures outpaced rising receipts, deepening the deficit. Outlays grew to $304 billion from around $262 billion in the same month last year while receipts rose to $184 billion from $163 billion.
European shares ended in positive territory after the Eurogroup of finance ministers decided to grant Greece two more years to make budget cuts. However, they postponed a decision on a further tranche of aid for Greece until November 20.
Meanwhile, International Monetary Fund Managing Director Christine Lagarde and Eurogroup Chair Jean-Claude Juncker publicly sparred over the deadline for Greece to lower its debt levels.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap This Week:
WEDNESDAY: Weekly mortgage apps, PPI, retail sales, business inventories, FOMC minutes, 13-F filings, Facebook lockup lifts; Earnings from Abercrombie & Fitch, Staples, Tyco, Limited Brands, NetApp
THURSDAY: PI, jobless claims, Empire state mfg survey, Philadelphia Fed survey, oil inventories, Fed bank of Chicago annual conf., credit card default rates reported; Earnings from Target, Wal-Mart, Viacom, Gap, Dell
FRIDAY: Treasury international capital, industrial production, e-commerce retail sales; Earnings from Foot Locker, JM Smucker, Ann
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