However, it wasn't all bad, despite the pullback. AT&T ( T) was better than expected on the profit line, as were Lockheed Martin ( LMT) and CME ( CME). While AT&T and CME declined, Lockheed Martin shot higher by 3.6% to $103.09.

British oil major BP ( BP) said earnings rose 1.5%, and Eli Lilly ( LLY) exceeded estimates and lifted its projections. BP dipped 2.9% to $72.30, while Eli Lilly finished the day unchanged at $57.17.

Pepsi ( PEP), EMC ( EMC) and McGraw-Hill ( MHP) were also better than expected, as were UAL ( UAUA) and Northrop Grumman ( NOC). UAL was the only name in the group to finish with gains, ending higher by 4.2% for the session.

Dow stock McDonald's ( MCD) posted only its second-ever quarterly loss. Excluding items, the restaurant chain matched the forecast for a profit of 71 cents a share. Shares slipped 95 cents, or 1.8%, to finish at $51.55.

On the research front, Citigroup upgraded Wachovia ( WB) to buy from hold, citing valuation. Still, shares closed lower by 41 cents, or 0.8%, to $48.41.

Among downgrades, Jefferies cut both United Rentals ( URI) and GlobalSantaFe ( GSF) to hold from buy. United Rentals was off by 56 cents, or 1.7%, to $32.42. GlobalSantaFe ended down 73 cents, or 0.9%, to $77.60.

On Monday, both stocks made M&A headlines and gave the major averages a boost. Transocean ( RIG) said it will combine with GlobalSantaFe to form a driller with an enterprise value of $53 billion. Private-equity firm Cerberus said it will acquire United Rentals for $2.83 billion.

If you liked this article you might like

Paradigm Opportunity Protects Investors in Tough Times

5 Things You Need to Know Before the Stock Market Opens (Correct)

U.S. Investors Brace for a Third Bailout in Greece

5 Things You Need to Know Before the Stock Market Opens

40 Hedge Funds' Best Stocks Show the Way for 2012 (Update 1)