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.
Read MoreVIX jump could be message for stocks
The aerospace company slide after media reports cited a warning from Standard & Poor's Ratings Services, which concluded the plane manufacturer could face a long-term credit risk if Congress doesn't reauthorize the Export-Import Bank, which provides low-cost loans to boost U.S. exports.
The declined 13.94 points, or 0.7 percent, to 1,963.71, with telecommunications pacing sector declines and utilities faring best among its 10 major industry groups.
The Nasdaq fell 60.07 points, or 1.4 percent, to 4,391.46.
For every two shares rising, roughly three fell on the New York Stock Exchange, where nearly 683 million shares traded. Composite volume neared 3.3 billion.
"This market could go down for any reason or no reason at all. It looks like we got the latter," wrote Elliot Spar, market strategist at Stifel, Nicolaus & Co., in afternoon commentary.
"You could point to the euphoria over 17,000 Dow industrials last week on the great job numbers and the persistent rally in Apple as it marched towards $100 as early warning signals," Spar emailed.
"The bond market continues to price in expansion with contained inflation," said Cardillo of the rise in Treasury prices, with the benchmark 10-year note up 1.1 percent on the year.
"The increased tension in the Middle East, between Hamas and Israel, I'm sure that's helping the buying of Treasuries," said EverBank's Gaffney, referring to the conflict that had Israeli Prime Minister Benjamin Netanyahu reportedly weighing a ground operation in the Hamas-controlled Gaza Strip.
Dollar-denominated commodities including gold and oil wavered, with gold futures reversing lower, down 50 cents at $1,316.50 an ounce, and crude futures also switching direction, finishing down 13 cents at $103.40 a barrel.
Stocks fell Monday, as investors looked to earnings and weighed the timing of when the Federal Reserve would hike interest rates.
Read More Record run interrupted
"The moderate pullback we saw yesterday was in line with the market moving into a trading range as the earning season unfolds. Will earnings live up to expectations? Will double-digit growth come back? This could be a catalyst for the market to respond to the valuation question," said Peter Cardillo, chief market economist at Rockwell Global Capital, of the lofty levels at which equities are currently trading.
—By CNBC's Kate Gibson
Coming Up This Week:
Earnings: WD-40, MSC Industrial, Texas Industries
7:00 a.m.: Mortgage applications
1:00 p.m.: $21 billion 10-year note auction
2:00 p.m.: FOMC minutes
Earnings: Family Dollar, Progressive, Barracuda Networks, Chevron (preliminary), PriceSmart
8:30 a.m.: Jobless claims
10:00 a.m.: Wholesale inventories
1:00 p.m.: $13 billion 30-year auction
1:15 p.m.: Kansas City Fed President Esther George
Earnings: Wells Fargo, Infosys, Fastenal
2:00 p.m.: Federal budget
2:45 p.m.: Atlanta Fed President Dennis Lockhart, Chicago Fed President Charles Evans
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