U.S. stocks closed lower Tuesday as the yen held stronger against the dollar amid renewed global growth concerns from weaker-than-expected Chinese manufacturing data.
"I don't see one lever pushing everything. It's a combination of again more of that risk-off, valuations a little extended, earnings did come in a little better (but still declining), concerns coming out of weaker PMI numbers pointing to lackluster growth," said Tim Dreiling, senior portfolio manager with the Private Client Reserve at U.S. Bank.
The Nasdaq composite ended more than 1 percent lower for its lowest close since March 14. (Tweet This)
The Dow Jones industrial average closed about 140 points lower after a choppy session that saw the index briefly more than halve morning losses of 220 points.
"The dominant theme in the macro economy is low nominal growth. That's what central banks are fighting against. The hallmark to me was the Bank of Japan move into negative interest rates," said David Lafferty, chief market strategist at Natixis Global Asset Management.
"What you're seeing today in the small sell-off we've had is a collection of small negative events. ... I don't think this is the beginning of a downtrend," he said. Lafferty expects stocks to remain in a range for both the near-term and long-term.
In early afternoon trade, the major averages came well off session lows. The VIX held well off earlier highs, and financials came off session lows, but Treasury yields held lower.
"It just looks like we had a nice sell-off this morning and we're getting a little bounce," said Peter Coleman, head trader at Convergex.
"We're still pretty close to the highs of the year so it's not like this is pretty dramatic," he said.
The euro came off highs after topping $1.16 to levels not seen since last August, while the yen was around its strongest against the dollar since October 2014. The dollar index recovered from 15-month lows after falling half a percent Monday for its sixth-straight day of decline.
It's important to know why the dollar is lower and against which currencies, said Andres Jaime, global FX and rates strategist at Barclays.
"Today it's, the dollar is not softer against the Swiss franc, the yen and the euro because the Fed is not going to raise rates. It's down because risk aversion has increased a bit," he said.
Treasury yields fell, with the around 0.75 percent and the 10-year yield around 1.80 percent.
China's Caixin manufacturing PMI remained in contraction territory for a 14th-straight month as the index missed expectations with a decline to 49.4 in April from 49.7 the prior month. A press release from Markit and Caixin noted that "overall employment declined again, with the rate of job shedding only fractionally slower than February's post-global financial crisis record."
"China has been out of the radar in the last few months because there's been some upward stability but I think that's questionable," Jaime said, noting the softer data also renewed concerns of oversupply in commodities such as oil.
U.S. crude oil futures settled down $1.13, or 2.52 percent, at $43.65 a barrel. Energy closed about 2.2 percent lower as the greatest laggard in the S&P 500.
The Dow transports closed 1.2 percent lower after earlier falling more than 2 percent.
"To me it's looking for something to trade until we get this Friday's (jobs) report," said JJ Kinahan, chief strategist at TD Ameritrade.
The U.S. dollar index reversed to hold slightly higher, with the euro near $1.151 and the yen at 106.43 yen against the greenback.
The Australian dollar fell against the U.S. dollar and yen after the Reserve Bank of Australia unexpectedly cut rates. The Aussie dollar hit its lowest against the dollar in nearly a month, and fell to its lowest against the yen since Feb. 12.
"A lot of momentum against the U.S. dollar right now," Jeremy Klein, chief market strategist at FBN Securities, said of morning weakness in the U.S. dollar index.
"It's a very circuitous trade," he said. "You'd (want a weaker dollar) at least with earnings but the reality is the strong euro is hurting European equities."
European stocks closed more than 1.5 percent lower, with the STOXX Europe 600 Banks index off nearly 3.7 percent.
The UK Markit/CIPS manufacturing PMI fell to 49.2 in April, falling below the critical 50.0 level for the first time since March 2013.
Japanese markets were closed for a holiday. Other Asian stocks closed mostly higher, with the Shanghai composite reopening after a long weekend with gains of almost 1.9 percent.
In earnings news, Pfizer topped expectations on both the top and bottom line. The drug giant also raised its full-year earnings forecast. The stock closed up 2.7 percent and is up 4.4 percent year-to-date.
AIG reported lower-than-expected profit for the third-straight quarter. Shares closed 1.15 percent lower and are down more than 9.5 percent for the year so far.
Cleveland Fed President Loretta Mester did not address expectations of Fed policy in her Tuesday comments at a financial markets conference, Dow Jones reported.
Atlanta Fed President Dennis Lockhart is also scheduled to speak Tuesday.
In a question and answer session with reporters, Lockhart said early Tuesday in a Reuters article that the Fed could hike twice this year, depending on the underlying strength of the economy. He had no firm view on raising rates in June but added there is currently not enough evidence on U.S. economic growth and firming inflation, the news wire reported.
Auto sales in April showed a pace of 17.4 million vehicles, according to Autodata.
The key economic news for the week is the employment report due Friday.
The closed down 18.06 points, or 0.87 percent, at 2,063.37, with energy leading all 10 sectors lower.
The Nasdaq composite closed down 54.37 points, or 1.13 percent, to 4,763.22.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 6 percent to 15.6.
About three stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 989 million and a composite volume of nearly 4.1 billion in the close.
Gold futures for June delivery settled down $4.00 at $1,291.80 an ounce.
—CNBC's Peter Schacknow and Reuters contributed to this report.
Correction: An earlier version of this story misspelled Andres Jaime's last name.
On tap this week:
Earnings: Avis Budget, CBS, Illumina, Mylan Labs, Western Union, Etsy, Glu Mobile, Live Nation Entertainment, Match Group, Newfield Exploration, Noodles & Co., Papa John's, Potbelly, Zillow
7 p.m. Atlanta Fed President Dennis Lockhart
Earnings: AB InBev, Priceline, Royal Dutch Shell, Siemens, Time Warner, Humana, IntercontinentalExchange, Zoetis, Cedar Fair, Kate Spade, Shopify, Shutterstock, Virtu Financial, Wix.com, 21st Century Fox, MetLife, Allstate, Fitbit, Kraft Heinz, Murphy Oil, Tesla Motors, Transocean, Whole Foods, Eldorado Gold, GoDaddy, Weight Watchers, Yamana Gold, Zynga
7 a.m.: Mortgage applications
8:15 a.m. ADP employment
8:30 a.m. International trade; productivity and costs
9:45 a.m. Services PMI
10 a.m. ISM nonmanufacturing; factory orders
10:30 a.m.: Oil inventories
6:30 p.m. Minneapolis Fed President Neel Kashkari
Earnings: Alibaba, Merck, Chesapeake Energy, Discovery Communications, Kellogg, Regeneron, MGM Resorts, Scripps Networks Interactive, AMC Networks, Avon Products, Fortress Investment, SeaWorld, Time, Activision Blizzard, Cerner, Motorola Solutions, News Corp., Square, Tableau Software, Dreamworks Animation, El Pollo Loco, FireEye, Herbalife, TrueCar, Wingstop, Yelp
7:30 a.m.: Challenger Job-Cut report
8:30 a.m. Initial claims
10:30 a.m.: Natural gas inventories
11:50 a.m. St. Louis Fed President James Bullard
7:15 p.m. Atlanta Fed's Lockhart, Dallas Fed President Rob Kaplan, St. Louis Fed's Bullard, San Francisco Fed's Williams at Hoover Conference
Earnings: ArcelorMittal, Cigna, Willis Towers Watson, Madison Square Garden, Berkshire Hathaway
8:30 a.m. Employment report
1 p.m.: Oil rig count
3 p.m.: Consumer credit
*Planner subject to change.
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