Stocks were whipsawed on Tuesday by worries about President Donald Trump's political future.
The S&P 500 dropped 0.8%, its biggest one-day drop since Aug. 23, to 2,966.60. The Nasdaq Composite also had its worst day in a month, dropping 1.5% to 7,993.63. The Dow Jones Industrial Average closed 142.22 points lower, or 0.5% at 26,807.77 after falling more than 200 points at one point.
House Speaker Nancy Pelosi will announce a formal impeachment inquiry later on Tuesday after she meets with her caucus to discuss the call Trump had earlier this year with Ukraine's leader, Volodymyr Zelensky, where he allegedly pressured him to investigate Democratic presidential hopeful Joe Biden's family.
"Now we have the facts, we're ready," Pelosi said.
A spokesman for the former vice president said Biden will urge Trump to comply with congressional requests for information. The spokesman added that Biden thinks Congress has no choice but to impeach Trump if he does not comply. Trump has admitted to talking to Zelensky about Biden but denied pressuring him. Rep. John Lewis, D-GA, tweeted in support of Trump's impeachment, noting: "The future of our democracy is at stake." Other prominent Democrats, including Sen. Dick Durbin of Illinois, also called on Tuesday for Trump's impeachment.
Stocks trimmed some of their losses after Trump said he would release the full transcript of the controversial call. Trump said in a series of tweets he "authorized the release tomorrow of the complete, fully declassified and unredacted transcript of my phone conversation" with Zelensky.
"In any news-driven market, that could have contributed to selling here, and then Biden came out and said 'I support impeachment.' Up until this point, I thought the political stuff didn't mean anything. Now that it becomes real, I can't discount it," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Stocks have surged since Trump was elected as he ushered in business friendly policies favored by Wall Street including a tax cut and decreased regulation. The Dow has surged more than 46% since Trump's election.
On top of the risks to Trump, investors worry the political turmoil surrounding an impeachment could weigh on an already fragile economy.
Stocks have previously struggled when a president faces the possibility of impeachment.In 1998, the S&P 500 fell about 20% at one point from its high to its low as independent counsel Kenneth Starr ramped up his investigation of President Bill Clinton for perjury and obstruction of justice, according to CFRA. The market would bottom as the House began impeachment proceedings and then would later recover all those losses and hit an all-time high in November of that year.
Investment firm Cowen said a similar political scenario could play out from Trump. Washington policy analyst Chris Krueger said in a note Tuesday that his "base case" is "the House impeaches Trump, though the Senate does not convict, e.g. Bill Clinton 2.0."
Disappointing consumer confidence data weighed on stocks. Consumer confidence for September slipped to 125.1 from 135.1 in August. Economists polled by Reuters expected a dip to 133.5.
Trump also had strong words regarding U.S.-China trade relations, noting he will not accept a "bad deal" as the two countries hold trade talks next month.
"Hopefully we can reach an agreement that will be beneficial for both countries. But as I have made very clear I will not accept a bad deal for the American people," Trump said at the United Nations General Assembly in New York.
Netflix was among the worst-performing stocks on Tuesday. The streamer's shares dropped more than 4% after several Wall Street analyst raised concern over the company's earnings.
Bank shares also fell broadly as investors loaded up on Treasurys, pushing yields lower. Citigroup slid 2.4% while Bank of America and J.P. Morgan Chase both pulled back more than 1%. The benchmark 10-year yield fell to 1.637%.
Stocks entered Tuesday's session within striking distance of their record highs. The Dow and S&P 500 were more than 1% below their all-time highs through Monday's close. The Nasdaq, meanwhile, was 2.7% away from reaching its record.
"While the market remains in an uptrend, we are seeing some evidence from our technical indicators that the S&P 500 may need further time to consolidate before attempting to make a new all-time high," J.C. O'Hara, chief market technician at MKM Partners, said in a note. "Overall, we are still constructive on the market but believe the call is to look at individual stocks for alpha generation, rather than a broad-based market call."
— CNBC's Sam Meredith and Patti Domm contributed to this report.