U.S. stocks tumbled on Tuesday, a day after the S&P 500's biggest drop in a month, as Treasury yields climbed and investors considered when the Federal Reserve would start raising interest rates.
Apple shares erased gains in the aftermath of the consumer-technology company's introduction of a watch and other products.
"It's a gigantic company, roughly three to four percent of the S&P 500," Mark Luschini, chief investment strategist at Janney Montgomery Scott, said of the potential impact on the broad market.
"That said, today's announcement is certainly company specific, it's not enough to shift macro fundamentals of the U.S. economy or to make any generalizations about U.S. corporate profits," Luschini added.
Wall Street eased sharp losses after the Apple releases, then resumed their steep losses in the final hour of trade, with U.S. equities taking their cues from rising Treasury yields overseas and domestically.
"The sell-off in bonds is definitely noteworthy, particularly in Europe. We've got a six-week high in the U.S. 10-year Treasury yield and a three-plus-year high in the two-year. Anything interest-rate sensitive is selling off here," said Peter Boockvar, chief market analyst at the Lindsey Group.
The National Federation of Independent Business said its index of small-business optimism edged higher last month, with more owners expecting conditions to improve in coming months.
Reports later in the week could show strengthening retail sales and fewer Americans filing for jobless benefits, with the Federal Reserve monitoring the health of the economy as it tapers its bond purchases and weighs when to begin hiking rates.
Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, believes the Fed could raise rates earlier than investors anticipate.
In a report emailed on Monday, Rieder said the labor market is improving, and argued against putting too much credence in weak numbers for August, writing "summer is traditionally a weak period for hiring."
Firming inflation data also argues for the Fed to move more quickly than many expect, said Rieder, who added that "excessively low rates may be harmful to the economy."
Blackrock is "one reliable input that has investors paying a little closer attention; it hasn't pulled forward expectations in the market at large, which still points to mid 2015, but it shows there is unease," said Luschini.
Fed members start their next two-day policy session in a week.
After an 118-point drop, the Dow Jones Industrial Average ended down 97.55 points, or 0.6 percent, at 17,013.87, with Home Depot falling hardest among the blue chips, 24 of 30 of which were in the red.
The fell 13.10 points, or 0.7 percent, to 1,988.44, with utilities telecommunications and financials leading declines and consumer staples losing the least of its 10 main industry groups.
Annie's rose after General Mills said it would acquire the producer of organic food for about $820 million.Barnes & Noble gained after the struggling book seller reported less of a quarterly loss than expected.
The Nasdaq lost 40.00 points, or 0.9 percent, to 4,552.29.
The CBOE Volatility Index, a measure of investor uncertainty, rose 6.6 percent to 13.50.
For every stock rising, more than three declined on the New York Stock Exchange, where nearly 603 million shares traded. Composite volume neared 2.9 billion.
On the New York Mercantile Exchange, commodity prices were mixed after recent losses.
On Monday, U.S. stocks mostly declined, with energy producers leading losses on oil's drop to a multi-month low, as investors retreated after a fifth week of gains lifted the S&P 500 to a record, with the Dow Jones Industrial Average not far behind.
—By CNBC's Kate Gibson
Coming Up This Week:
Earnings: Lands' End, Vera Bradley, Manchester United, Restoration Hardware, Five Below, Men's Wearhouse
7:00 a.m.: Mortgage applications
10:00 a.m.: Wholesale trade
10:30 a.m.: Oil inventories
1:00 p.m.: 10-year note auction
8:30 a.m.: Unemployment claims
10:30 a.m.: Natural gas inventories
1:00 p.m.: 30-year bond auction
2:00 p.m.: Treasury budget
Earnings: Darden Restaurants
8:30 a.m.: Retail sales
8:30 a.m.: Import/export prices
9:55 a.m.: Consumer sentiment
10:00 a.m.: Business inventories
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