Stocks Bounce Off Lows, but Still End Lower; Egypt Weighs

Stocks bounced off their worst levels in the final minutes but still finished slightly lower in choppy trading Tuesday as investors hesitated to jump in amid ongoing concerns about the Federal Reserve's plans to scale back its bond-buying program and reports of political turmoil in Egypt.

Stocks tumbled near session lows following reports that Egypt's military had drawn up plans to suspend the country's constitution, dissolve its legislature and set up an interim government. Major averages were initially higher after a better-than-expected factory orders report and upbeat auto sales.

"Egypt is definitely the wildcard—the army has issued an ultimatum so the clock is ticking…if we have a geopolitical concern, that could affect oil supply and it's a negative in the near-term until we can ascertain what the issue is," said Art Hogan, managing director at Lazard Capital Markets.

Crude oil settled at a 14-month high, just shy of $100 a barrel.

(Read More: 10 Things You Need to Know About the First Half)

S&P 500

The Dow Jones Industrial Average declined 42.55 points, to finish at 14,932.41, falling back below the psychologically-important 15,000 level. Boeing and GE led the laggards, while JPMorgan gained. At its session low, the blue-chip index tumbled more than 100 points.

The S&P 500 erased 0.88 points, to close at 1,614.08. And the Nasdaq dipped 1.09 points, to end at 3,433.40. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended above 16.

"Technically, if the S&P can't push above its 50-day moving average of 1,624, that becomes an area of resistance and it means this is a rally that's starting to fade," said Hogan. "This is the third time we've tested it."

Among key S&P sectors, industrials led the laggards, while telecoms gained.

"Expect the market to be fairly mercurial—especially this week. The volume is still pretty anemic," said Keith Bliss, senior vice president at Cuttone & Co. "The longer-term trend is still positive, since we sold off so harshly last week, but we're going to have bumps in the road. We're in a period where economic data will be OK to good, but not enough to make the Fed really back away from its policy."

Earlier, New York Fed president William Dudley reiterated his comments that the Fed's asset purchases could continue at a higher pace than that outlined last month by Chairman Ben Bernanke, if the labor market and economic growth lagged the central bank's expectations.

"Statistically, if the first half of the year is positive, it tends to set a positive tone for the second half, but these are based on data that include periods where markets were not focused on liquidity from central banks," said Quincy Krosby, market strategist with Prudential Financial.

On the economic front, factory orders gained 2.1 percent in May, rising for a second-straight month, according to the Commerce Department. Economists polled by Reuters had expected a gain of 2 percent.

Adding to jitters, Portugal's foreign minister Paulo Portas resigned in protest against austerity measures. His resignation came after finance minister Vitor Gaspar stepped down from his post Monday, complaining he lacked political support for his austerity program. But Portugal's prime minister says he "won't resign" despite the resignations of two key members, adding that his government will continue to battle to restore the restore the country's financial health.

Separately, tensions remained high in Italy's fragile coalition government. Prime Minister Enrico Letta called a government meeting after the Civic Choice (Scelta Civica) party threatened to withdraw from the coalition on Monday, citing frustration with the slow pace of reforms.

Meanwhile, a weaker currency helped the Japanese Nikkei, which crossed the key 14,000 points to hit a new one-month high. The Shanghai Composite reversed earlier losses to rise above the 2,000 mark, its highest level in over one week.

The Federal Reserve Board of Governors approved two bank reform measures. Large bank stocks, which initially rallied following the news, eventually turned lower along with the broader market. JPMorgan was the only major bank to finish higher.

U.S. auto sales in June recorded their strongest month in more than 5-1/2 years. Ford, General Motors and Toyota all gained after the automakers posted monthly sales that all topped expectations. Auto sales account for about 16 percent of the country's overall retail sales.

Among earnings, Constellation Brands declined after the alcoholic beverage company reported lower-than-expected quarterly earnings. Still, the company lifted its full-year forecast.

Second-quarter earnings season will officially kickoff next week, when Dow component Alcoa reports on July 8. Market expectations are low for earnings, with S&P Capital IQ knocking down its expectations again this week to 2.8 percent for the S&P 500 bottom-line profit.

(Read More: Prove-It Time Ahead for Market as Earnings Loom)

Walt Disney extended Bob Iger's tenure by 15 months. Iger had initially planned to step down as CEO in April 2015.

Zynga surged after the social games services provider confirmed that it would replace CEO Mark Pincus with Microsoft executive Don Mattrick.

(Read More: Can the Man Behind Xbox Save Zynga?)

Meanwhile, the Winklevoss Bitcoin Trust announced plans for a $20 million IPO (initial public offering), offering investors exposure to the Bitcoin digital currency. In the meantime, the world's second biggest IPO of the year, a $4 billion new listing by Suntory Beverage and Food, will debut on the Tokyo stock exchange this week.

(Read More: World's Second Biggest IPO of Year Lists This Week)

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

Coming Up This Week:

WEDNESDAY: MBA mortgage applications, Challenger job-cut report, ADP employment report, jobless claims, international trade, ISM non-mfg index, oil inventories, natural gas inventories, NYSE early close at 1pm ET
FRIDAY: Employment situation, mid-year stress tests due

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