The Dow Jones industrial average (INDU) fell 92 points, or 0.7%, to 12,501. The S&P 500 (SPX) lost 5.5 points, or 0.4%, to 1,332 and the Nasdaq Composite (COMP) fell 3 points, or 0.1%, to 2,840.
Investors have been torn between two forces: second-quarter corporate results that have been generally positive and concerns tied to the continuing battle over the United States' debt ceiling. Of the S&P 500 companies that have reported their quarterly results so far, 73% have beaten expectations, according to data by Thomson Reuters.
"You have to attempt to put the political noise aside, and look at the fundamentals -- in this case, corporate earnings," said Frank Davis, director of sales and trading at LEK Securities. "We are under the belief that this debt ceiling issue will get worked out."
The rhetoric over the debt ceiling ratcheted up further late Monday, after President Obama and House Speaker John Boehner each used primetime television addresses to make their case to the American people.
The president singled out the House Republicans, and said the political showdown is "no way to run the greatest country on Earth." But as Tuesday wore on, there was no clear legislative path forward.
Months of increasingly tense negotiations have failed to bring a deal that can win approval from all of the necessary players -- the Republican-led House, Democratic-led Senate and the White House.
"It's going to come down to the wire," said Kenny Landgraf, principal and founder of Kenjol Capital Management. "It's just going to come down to who is going to blink first."
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