Stocks End Lower Ahead of Earnings, Dragged by Telecoms

Stocks finished lower for the second session Tuesday, dragged by telecoms, as investors remained on the sidelines ahead of what is expected to be a weak fourth-quarter earnings season.

S&P 500

The Dow Jones Industrial Average slid 55.44 points, or 0.41 percent, to end at 13,328.85, led by Boeing and Verizon.

The S&P 500 erased 4.74 points, or 0.32 percent, to close at 1,457.15. The Nasdaq declined 7.00 points, or 0.23 percent, to finished at 3,091.81.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended below 14, closing lower for the sixth-straight session. (Read More: Why VIX's Recent Plunge May Be Bad for Stocks)

Most key S&P sectors finished in negative territory, dragged by telecoms led the laggards, while materials eked out a gain.

"We're going to have some improvement about perceptions of growth—we need just a little bit of confidence," said Bob Doll, chief equity strategist at Nuveen Asset Management. "I'm using the phrase: muddle-through economy and grind-higher equity market—it's not going to be a gallop."

S&P 500 companies are expected to post earnings growth of 2.8 percent for the fourth quarter, up from the barely positive 0.1 percent growth in the third quarter, according to Thomson Reuters. (Read More: Brace Yourself--Earnings Disappointments Ahead)

"[The earnings expectation] bar is so low that it's almost impossiblenot to beat it," said Kenny Polcari, director at O'Neil Securities. "The Chinastory is what we're going to hear going forward."

Alcoa was slightly higher ahead of its earnings report. The Dow component and aluminum producer is expected to post earnings of 6 cents a share on revenue of $5.6 billion, according to analysts polled by Thomson Reuters.

Boeing slumped after a Japan Airlines 787 aircraft returned to its gate prior to takeoff at Boston's Logan International Airport after a fuel leak. No fire or injuries were reported. This comes a day after a different Japan Airlines 787 Dreamliner aircraft caught fire at Logan airport.

Monsanto rallied after the agricultural biotechnology company boosted its earnings outlook for fiscal 2013 and handed in better-than-expected quarterly results.

For-profit education company Apollo Group is also expected to post earnings after the closing bell.

Yum Brands slipped after the fast food company reported that its China sales would be down more than expected due to a government review of the country's poultry supply.

Sears Holdings dropped following news that CEO Louis D'Ambrosio will step down and will be replaced by Chairman Edward Lampert.

Apple eked out a gain after DigiTimes reported that the tech giant is planning on manufacturing low-cost iPhones for emerging markets in the second half of 2013. The low-cost alternative will include a larger display and a new exterior design. (Read More: Samsung Galaxy's Big Bang Cements Lead Over Apple)

Separately, the Consumer Electronics Show in Las Vegas kicked off Monday night. Chipmakers such as Intel, Nvidia will be in focus. Large manufacturers such as Samsung, LG, Sony and Panasonic are expected to unveil new gadgets throughout the week. (Read More: Here's What to Expect at CES 2013)

AT&T declined even after the wireless communications company said it sold more than 10 million smartphones in the fourth quarter, topping its previous record of 9.4 million a year ago. The company is expected to post earnings results on January 24. Rival Verizon also traded lower.

GameStop slumped to lead the S&P 500 laggards after the videogame retailer said it expects to post a decline in same-store sales for the fourth quarter due to a weak holiday season.

The government auctioned $32 billion in 3-year notes at a high yield of 0.385 percent. The bid-to-cover was 3.62.

On the economic front, small business sentiment was mostly unchanged in December, as owners expect business conditions to deteriorate over the next six months, according to a National Federation of Independent Business survey. The December reading was the second lowest since March 2010.

Consumer credit gained in November by $16.05 billion, rising for the fourth-straight month, according to the Federal Reserve. Economists polled by Reuters had forecast consumer credit rising $12.75 billion.

European shares briefly dipped following market chatter that France's sovereign debt rating would be downgraded by Standard & Poor's. However, a senior French official said the rumors are "erroneous," while the ratings agency said it does not comment on market rumors.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

WEDNESDAY: Weekly mortgage applications, oil inventories, 10-yr note auction; Earnings from Constellation Brands, PriceSmart
THURSDAY: Jobless claims, wholesale trade, natural gas inventories, Fed's George speaks, 30-yr bond auction, Fed's Bullard speaks, Fed's balance sheet, money supply, Fed's Kocherlakota speaks, Herbalife analysts day, videogame sales data release; Earnings from Chevron (interim report), Ruby Tuesday
FRIDAY: International trade, import and export prices, Fed's Plosser speaks, Treasury budget, Best Buy to report holiday sales; Earnings from Wells Fargo

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