U.S. equities fell on Tuesday, with financials lagging, as uncertainty around President-elect Donald Trump's policies grew.
"I't not about proposals anymore ... but what are they going to do," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. "I think investors are at a pause trying to figure out what's next." He also said he is positive about U.S. equities, noting underlying global economic growth has been overlooked.
The Dow Jones industrial average closed about 60 points lower after briefly falling 100 points, with Goldman Sachs and JPMorgan Chase contributing the most losses. The S&P 500 fell 0.3 percent, with financials dropping more than 2 percent.
"The [S&P 500] remains bound by a consolidation phase that reflects an indecisive market as we approach the inauguration," said Katie Stockton, chief technical strategist at BTIG, in a note. "We believe the risk is greater to the downside in the near term, and would be wary of a breach of the lower boundary of the range near 2250."
The Nasdaq composite declined 0.6 percent, while the small-caps Russell 2000 dropped 1.44 percent.
"You don't know what's going to happen. So it's hard to reposition into this or that," said Jeff Layman, partner at BKD Wealth Advisors.
Trump criticized a proposed corporate tax plan from the House of Representatives, labeling the plan as "too complicated," in an interview with The Wall Street Journal.
The stock market has soared since the election partially on hopes of corporate tax reform, deregulation of certain sectors and more government spending. Trump's inauguration is scheduled for Friday.
"There's a lot of nervousness as Trump gets set to take office," said Peter Cardillo, chief market economist at First Standard Financial. "Until we see what he does in his first 100 days, I think the market is going to remain in a wait-and-see pattern."
Adding pressure to U.S. stocks were concerns of a hard Brexit. In a speech Tuesday, British Prime Minister Theresa May indicated the United Kingdom would seek a clean break from the European Union. She added, however, The U.K. government will put the Brexit deal it agrees with the European Union to a parliamentary vote.
Naeem Aslam, chief market analyst at Think Markets, said May's speech was expected to be "catastrophic." "But, she has managed the expectations and delivered the speech very well. Moreover, the final Brexit deal will be put up for a vote in parliament and this makes things a little less pessimistic," he said.
The British pound skyrocketed more than 2.5 percent against the dollar, trading around $1.24, on track for its best day since 2008. The pound briefly broke below $1.20 earlier this week.
"The fact that the pound briefly broke below $1.20 and then rebounded shows you that the bears aren't ready to take the pound in that direction," said Adam Sarhan, CEO at 50 Park Investments. The pound has fallen sharply since last June's Brexit vote.
Pound/dollar 1-year chart
The pan-European Stoxx 600 index rebounded after May's speech, falling about 0.15 percent, paring losses.
There are no major U.S. economic data due Tuesday, but a slew of firms reported quarterly results, including Morgan Stanley, which beat analyst expectations on both the top and bottom line. Morgan Stanley shares fell 3.8 percent, however.
The dropped 6.75 points, or 0.3 percent, to 2,267.89, with financials leading five sectors lower and consumer staples outperforming.
The Nasdaq composite slipped 35.39 points, or 0.63 percent to 5,538.73.
Decliners were a step ahead of advancers at the New York Stock Exchange, with an exchange volume of 887.16 million and a composite volume of 3.53 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.8.
—CNBC's Silvia Amaro contributed to this report.
On tap this week:
Earnings: CSX, Interactive Brokers
6:00 p.m. San Francisco Fed President John Williams
8:30 a.m. CPI
8:30 a.m. Business leaders survey
9:15 a.m. Industrial production
10:00 a.m. NAHB
11:00 a.m. Minneapolis Fed President Neel Kashkari
2:00 p.m. Beige book
3:00 p.m. Fed Chair Janet Yellen speaks to Commonwealth Club of San Francisco
4:00 p.m. TIC data
7:45 a.m. European Central Bank rate decision
8:30 a.m. Initial claims
8:30a .m. Housing starts
8:30 a.m. Philadelphia Fed survey
3:45 p.m. San Francisco Fed's Williams
4:00 p.m. Boston Fed President Eric Rosengren
9:00 a.m. Philadelphia Fed President Patrick Harker
1:00 p.m. San Francisco Fed's Williams