Stocks on the Cyprus exchange have been on a steep slide, falling more than 11 percent in 2013 and 63 percent over the past year though the market there actually rose 3 percent Monday.
"It is an explosive political situation," Nick Spiro, head of Spiro Sovereign Strategy, told CNBC. "This is a rubicon which should have never been crossed...This bailout agreement has Germany's political fingerprints all over it."
European shares traded lower on the uncertainty over the bailout, but Asian shares recovered some ground after Monday's sell-off.
On the economic front, housing starts gained 0.8 percent in February to a 917,000-unit annual rate, while new permits for construction jumped to the highest level since 2008, according to the Commerce Department. Economists had expected a reading of 915,000.
Meanwhile, the Federal Reserve's Open Market Committee starts its two-day meeting and investors will be watching for any signs that the central bank could start winding down its quantitative easing program. A decision will follow on Wednesday afternoon.
Among earnings, DSW tumbled after footwear retailer missed earnings and revenue expectations.
Walgreen gained after drug distributor AmerisourceBergen signed a 10-year distribution contract with the drugstore chain and associate Alliance Boots GmbH. In addition, Walgreen posted better-than-expected earnings, helped by improved gross margins.
Skullcandy soared after the headphone maker appointed former Nike executive Hoby Darling as its new CEO. And Electronic Arts edged higher following news that CEO John Riccitiello would be stepping down from his helm at the game maker.
Lululemon tumbled after the yoga-apparel maker said it will withdraw shipments of unexpectedly sheer women's yoga pants from its stores. The company said the move will likely affect its bottom line.