U.S. stocks closed lower Tuesday, following declines in overseas developed markets on soft data, despite gains in oil prices and better U.S. data.
The Dow Jones industrial average closed down about 133 points, its first triple-digit loss since March 8.
Selling accelerated as the close approached, with the Dow briefly off more than 150 points and the S&P 500 tumbling more than 1 percent to temporarily erase gains for the year so far. The S&P 500 closed 1.01 percent lower for its biggest daily loss since March 8, but held 0.06 percent higher for 2016.
"I think it's generally a concern about the economy and central banks. The (stocks) that are down the most are the ones people got long the most. It doesn't have anything to do with the fundamentals," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
The second-best performer in the S&P year-to-date, utilities, closed nearly 1.9 percent lower to lead all 10 S&P sectors lower. Following declines in utilities were financials and health care, the only S&P sectors negative year-to-date. The iShares Nasdaq Biotechnology ETF (IBB) ended slightly lower after briefly attempting gains.
"Markets are getting a bit tired after a (sharp run higher). That's probably it more than anything but there's always a catalyst," said Ben Pace, chief investment officer at HPM Partners.
"You have a bias down today," he said. The major U.S. averages are still up about 12 percent or more from their Feb. 11 lows, and the Dow and S&P are about 4 percent below their 52-week intraday highs.
Outside of overnight declines in European and Japanese stock indexes on soft data, issues weighing on U.S. stocks included concerns about the coming earnings season, the Treasury's announcement of fresh moves to limit inversions, and low oil prices.
In the settle, U.S. crude oil futures turned higher to close up 19 cents, or 0.53 percent, at $35.89 a barrel.
Shares of Allergan closed 14.77 percent lower. Earlier, the stock fell more than 15 percent to a 52-week low after the Treasury Department late Monday took new steps to curb tax-avoiding "inversion" deals in which a U.S. company reincorporates overseas following the purchase of a foreign company. Dublin-based Allergan had agreed to be bought by Pfizer in the biggest inversion deal ever. Shares of Pfizer closed up 2.08 percent on Tuesday.
That "really wasn't helpful on a day like this, especially since health care has shown a lack of leadership," Pace said.
Stocks attempted to recover much of their morning decline in intraday trade after the ISM non-manufacturing PMI came in for March at 54.5, up from February's 53.4 print. The U.S. Markit services PMI for March also rose, coming in at 51.3 versus 49.7 in February.
In mid-morning trade, the Dow temporarily more than halved morning losses of 141 points and the S&P 500 recovered from a 1 percent dip.
"All of a sudden we're reminded again the U.S. economy is not headed into a massive recession. That's what's new here," said Art Hogan, chief market strategist at Wunderlich Securities.
"We're still going to battle the hurdles that we started the day with, but it looks like we're better (able) to do that battle after that print," he said.
Gold futures briefly jumped more than 1 percent, before settling up $10.30 at $1,229.60 an ounce. The yen traded near its strongest level against the U.S. dollar since October 2014.
The U.S. dollar index was slightly higher, with the euro near $1.138 and the yen at 110.35 yen against the greenback.
Read MoreCan stocks break out of oil's grip?
Treasury yields fell to lows not seen in more than a month, with the at 0.72 percent, its lowest since Feb. 25 and the 10-year yield touching 1.717 percent, its lowest since March 1. The German 10-year yield recovered slightly after a sharp fall to a low of 0.081 percent, its lowest since April 2015.
European stocks closed sharply lower, with the STOXX Europe 600 off 1.9 percent and the German DAX 2.6 percent lower. The STOXX Europe 600 Banks index underperformed, falling 3.4 percent on the day and down 4.9 percent for the quarter so far.
The Nikkei 225 fell 2.4 percent and the Hang Seng closed more than 1.5 percent lower. The Shanghai composite closed up nearly 1.5 percent.
Read MoreWorld stocks heat map
"This persistent weakness in global markets can no longer be ignored," said Peter Boockvar, chief market analyst at The Lindsey Group.
The final March PMI for the euro zone's composite output and services both came in at 53.1, both below flash estimates, according to Markit. U.K. services PMI data was 53.7 for March, up from February's 35-month low of 52.7.
The fell to 50.0 in March from 51.2 in February.
In other economic news, the U.S. trade deficit widened more than expected in February, increasing 2.6 percent to $47.1 billion, Reuters said. January's trade deficit was revised slightly up to $45.9 billion from the previously reported $45.7 billion.
The February JOLTS report showed the number of hires increased to 5.4 million, the highest level since November 2006.
In corporate news, Disney unexpectedly announced late Monday that Thomas Staggs, chief operating officer and a potential successor to CEO Bob Iger, will leave the company this year. Shares of Disney were off more than 1.5 percent in afternoon trade as one of the greatest contributors to declines in the Dow.
The Dow transports closed 0.57 percent lower with Matson leading decliners.
The closed down 20.96 points, or 1.01 percent, at 2,045.17, with utilities leading all 10 sectors lower.
The Nasdaq composite closed down 47.86 points, or 0.98 percent, at 4,843.93.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, had its biggest daily gain since Feb. 8, rising 8.99 percent to 15.39.
About seven stocks declined for every three advancers on the New York Stock Exchange, with an exchange volume of nearly 1.1 billion and a composite volume of almost 4.1 billion in the close.
—Reuters contributed to this report
Clarification: This story has been updated to reflect the 2-year Treasury yield's low of the day was 0.72 percent.
On tap this week:
Earnings: Monsanto, Constellation Brands, RPM International, Apollo Education, Bed Bath & Beyond
10:30 a.m.: Oil inventories
12:20 p.m. Cleveland Fed President Loretta Mester
2 p.m. FOMC minutes from its March 15-16 meeting
6:30 p.m. St. Louis Fed President James Bullard
8 p.m. Dallas Fed President Rob Kaplan
Earnings: CarMax, Rite Aid, Ruby Tuesday, Duluth, WD-40
8:30 a.m. Jobless claims
10:30 a.m.: Natural gas inventories
3 p.m. Consumer credit
5:30 p.m. Fed Chair Yellen with former chairmen Bernanke, Greenspan, Volcker on a panel hosted by International House
8:15 p.m. Kansas City Fed President Esther George
10 a.m. Wholesale trade
1 p.m.: Oil rig count
*Planner subject to change.
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