For much of the day, the apprehension about earnings was at least partially offset by positive developments in the eurozone, where finance ministers reached an agreement on supporting Spain's troubled banks. But there are still many questions about the deal will work and skepticism about whether it's enough.

"The Euro group has agreed to give Spain €30 billion, because you never know when €30billion might not come in handy," noted Paul Donovan, global economist at UBS. "The route for the cash matters. Does Spain end up with the debt on its balance sheet, or is cash passed straight to the banks (retrospectively - initially the money is a government liability)?"

"The news from Spain is going to get worse," said Adrian Day, president of Adrian Day Asset Management. "The deficit will obviously get wider; the governments have said that they aren't going to meet the targets. It strikes me that the market is probably saying bad news is good and the worse Spain gets the more the ECB European Central Bank is going to have to accommodate. There's going to have to be an accommodative policy here."

"We've had 20 plus summit meetings in Europe," said Brett Bartman, senior vice president at RBC Wealth Management. "When there is good news out of them or when they solve some problem, the market heads higher." All three major U.S. averages rallied at the open Tuesday. "I don't make too much of it... until this is really worked on, this is only a temporary bounce. The bounce will not last any longer until the next set of news out of Europe that says something very different."

The FTSE in London finished up 0.65% and the DAX in Germany closed higher by 0.79%. Hong Kong's Hang Seng Stock index finished down 0.16% and the Nikkei in Japan closed lower by 0.44% after China reported weak trade data that pointed to more signs of a slowdown in the Asian economic powerhouse, whose top trading partner is Europe.

On Wednesday, the Federal Open Market Committee releases minutes from its late June meeting, and investors will be parsing the report for any dovish rhetoric and indications towards more monetary easing to counter economic sluggishness and stimulate the markets.

"I suspect that more likely than a massive QE3, there will be a series of smaller measures," said Day, ahead of the release. "The Fed is also running out of time a little bit. They meet at end of this month and then in September, which is getting awfully close to the election. They usually don't want to be seen as interfering with the market around the election. If they're going to do something, they might have to do it now."

August crude oil futures settled lower by $2.08 at $83.91 a barrel. August gold futures lost $9.30 to settle at $1,579.80 an ounce.

The benchmark 10-year Treasury rose 2/32, diluting the yield to 1.510%, while the greenback was rup 0.29%, according to the dollar index.

In other corporate news, shares of Research In Motion's ( RIMM) dropped 5% as the smartphone maker held its annual shareholders' meeting.

Board members reportedly expressed support for the company's current management team despite the recent news of a delay in the launch of the BlackBerry 10 and plans for layoffs amid mounting losses.

One of the market's biggest decliners was Mako Surgical ( MAKO), which saw its stock plunge 43.1% after the Fort Lauderdale, Fla.-based medical device maker reduced its outlook for 2012, saying it now expects to sell 42 to 48 of its RIO surgical systems, down from a prior expectation for sales of 52 to 58 units.

-- Written by Andrea Tse and Joseph Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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