Stocks fell on Tuesday as investors navigated a batch of disappointing company reports ahead of a key inflation reading.

The S&P 500 fell 0.42% to 4,122.47, while the Nasdaq Composite dropped 1.19% to 12,493.93. The Dow Jones Industrial Average shed 58.13 points, or 0.18%, to close at 32,774.41.

The declines came after memory chipmaker Micron warned that revenue may fall short of its prior guidance because of "macroeconomic factors and supply chain constraints." The stock fell more than 3%.

It's been a rough week for chipmakers. On Monday, weaker-than-expected revenue guidance from Nvidia weighed on the group, and those stocks extended their losses on Tuesday.

"These are two big players that I think investors thought were in a better position to navigate through some of these recent supply chain issues. I think there's concern that this is really going to weigh on tech," said Ed Moya, senior market analyst at Oanda.

The S&P 500 has climbed for three straight weeks, but earnings season has featured demand warnings from executives of major companies. Investors are watching closely to determine how the Federal Reserve's fight against inflation is rippling through the economy.

"Everything that we're getting is [showing] that inflation is having a much harder impact on corporate America outlooks, and that's why I think this market is going to be difficult to continue to buy equities," Moya added.

Outside of chips, a pair of Nasdaq-listed stocks also got hit. Novavax slumped nearly 30% after slashing full-year revenue guidance because of poor demand for its Covid vaccines. Upstart declined more than 11% after the consumer lending company reported second quarter results that missed both profit and revenue expectations.

Investors are awaiting the latest reading of the July consumer price index, due Wednesday. The report is expected to show a slight slowdown in inflation, thanks in part to a fall in oil prices, which could inform the market about the next steps for the Federal Reserve.

Consumer price index for July could show inflation peaked

The July consumer price index is released Wednesday morning at 8:30 a.m. ET, and markets are looking for proof that inflation may have peaked.

According to Dow Jones, CPI is expected to rise by 0.2% on a monthly basis, or 8.7% year-over-year. That compares to 1.3%, and 9.1% year-over-year in June. Excluding food and energy, CPI is expected to rise by 0.5%, down from 0.7%. Year-over-year core inflation is expected to come in at 6.1%, up from June's 5.9%.

"Everyone is primed for reasonably good news, so it's got to be good news. If it's not as good as people think, it's going to be unusually bad news," said Mark Zandi, chief economist at Moody's Analytics.

Market pros expect the inflation report to provide clues about how aggressive the Federal Reserve will need to be in its fight against inflation. However, they note there is another employment report and CPI for August ahead of the Fed's next meeting in September.

--Patti Domm

Stocks close lower, with Nasdaq falling more than 1%

Wall Street never mounted much of a rally on Tuesday, and the three major averages closed down for the session.

The Nasdaq Composite fell more than 1% for its third straight negative session. The S&P 500 shed 0.4% for its fourth-straight negative session.

The Dow, which held up on Monday, fell 58 points.

-Jesse Pound

Markets braced for improvement in consumer inflation, could be turning point for bonds

Treasury yields were higher ahead of the release of July's consumer price index Thursday.

The report is expected to show that headline CPI was at a year-over-year pace of 8.7% in July, down from 9.1% in June, according to Dow Jones. Traders said for the market to view it positively, inflation would have to be in line with expectations or even lower.

Ahead of the report, the spread between the 2-year note yield and 10-year note yield continued to widen, with the 2-year yield rising further above the 10-year. The fact the 2-year is higher means the yield curve is inverted, and that is sometimes a signal of recession.

Andy Brenner of National Alliance said CPI could be a turning point for the market. "If we get a good CPI report, which is what a lot of people are hoping for, I think you can switch the yield curve around and you can shift the odds of the Fed to be less aggressive from more aggressive," said Brenner. "On the other hand, if it's a bad number, and it's still 9%, or it's still high month-over-month, the markets going to try to lock in 75 (basis points) for September."

The fed funds futures has been pricing in high odds of another three-quarter point, or 75 basis point hike, for September. Some economists, however, expect the hike to be a half point.

--Patti Domm

Nasdaq still leads to the downside as final hour begins

With one hour left in Tuesday's trading session, the Nasdaq Composite continues to lead the major averages to the downside. The tech-heavy index is down by 1.2%, while the S&P 500 is down about 0.5%. The Dow has slipped 60 points, or 0.2%.

Small caps have been hit particularly hard today. The Russell 2000 is down 1.7%.

-Jesse Pound

Dow near session lows

After trading near the flatline for much of the day, the Dow has fallen more than 100 points in afternoon trading.

Salesforce is the worst performer in the 30-stock average, falling 4.5%. Apparel stock Nike has slid 3.6%.

Home Depot and chipmaker Intel are also weighing on the Dow, falling more than 2% each.

—Jesse Pound

Investors should consider getting defensive ahead of CPI report, strategist says

The rally off the June lows for stocks means that some investors may be looking to hedge their bets ahead of Wednesday's key CPI report.

Mike Reynolds, vice president of investment strategy at Glenmede, said his firm believes the market is underestimating the Fed's rate hike path and that investors should consider taking some risk off the table.

"For those that maybe missed out on an opportunity to de-risk their portfolios a few months ago, with the rally we've seen, maybe this is the opportunity to get that positioning in place. Particularly ahead of such a big report tomorrow, where the market is going to be very sensitive to that output," Reynolds said.

— Jesse Pound

Amazon's latest deals make its acquisition strategy clear, says DA Davidson

Amazon's latest acquisition announcements of iRobot and One Medical show the ecommerce company is following its historical approach of "build first, buy second," according to DA Davidson.

Put another way, Amazon has already started building those businesses within its own company first.

Both deals are also under $10 billion, which suggests Amazon is confident deals at those levels will be approved by the government, analyst Tom Forte wrote in a note.

—By Michelle Fox

Bitcoin struggles to break out above $24,000

Bitcoin was trading about 3% lower midday at about $23,000, and while that level is a welcome lift from its summer low, investors are still hoping to see it hold a meaningful breakout above $24,000.

The cryptocurrency has been working its way higher over the past few weeks from its June low of about $18,000, which many are speculating could be a bottom – including JPMorgan, which said this week that cryptocurrencies "have found a floor."

Bitcoin rose above $24,000 twice in late July and briefly touched it again this Monday. It remains about 66% below its all-time high of $68,990.90.

— Tanaya Macheel

Raymond James downgrades Micron to outperform

Raymond James downgraded shares of Micron to outperform from strong buy, and trimmed its price target, following Tuesday's revenue warning from the chipmaker.

"While we continue to believe MU will benefit from significant secular trends driving long-term demand — while also enjoying technology and cost advantages over peers — we feel near-term news is likely to work against shares into FY23, limiting upside," analyst Melissa Fairbanks wrote in a Tuesday note.

The analyst cut the price target to $65, down from $72, implying roughly 12% upside from where shares were last trading at $57.95.

Shares are down more than 5% in midday trading.

— Sarah Min

June wasn't the market low, BofA says

It's probably too early to call the June dip in stocks the market low, signaling stocks could slip even further, according to Bank of America.

Analysts led by Jared Woodard see a few reasons that markets haven't yet bottomed out. Those include looser financial conditions, a lack of bull market indicators flashing that June is the bottom of the cycle, and strength in U.S. retail investors.

Read more from CNBC PRO.

— Carmen Reinicke

Market breadth narrows as stocks fall

After Wall Street enjoyed a fairly broad rally in recent weeks, Tuesday's decline is now taking a bite out of several areas of the market.

Declining stocks are slightly outpacing advancers in the S&P 500, and that gap stretches to nearly 2-to-1 when looking at the NYSE Composite, according to FactSet.

While tech remains a drag on the market, the consumer discretionary, materials and industrials sectors are struggling on Tuesday.

— Jesse Pound

A measure of short-squeeze activity is highest since 2021 meme madness

The GS Most Short Index has been on a tear, surging more than 18% over the last 5 days. With those gains, the index – a key measure of stocks that investors are shorting, or betting against – is at its highest level since January 2021, the height of meme stock madness, when meme stocks such as GameStop and AMC Entertainment surged.

"Prior to that [the index was] only higher [in] the last the five-years+ coming off the Covid-bottom in March/ April 2020," wrote analyst Jonathan Krinsky of BTIG in a Monday note. He added that the gains feel somewhat forced, but that he respects the price action now as the market reacts favorably to "bad news."

He also noted that the S&P 500 looks to be testing the 4,200 level and that small caps continue to outperform.  

— Carmen Reinicke

Chip stock sell-off deepens

Stocks are near session lows, with the Nasdaq down 1.4% and the Dow losing about 100 points.

The worst performers in the Nasdaq 100 show that the chip sector is taking the brunt of this sell-off. Shares of Lam Research and Marvel Technologies are each down by more than 7%. KLA Corporation has dropped 6.6%, while Micron is down more than 5%.

Elsewhere, electric vehicle stock Lucid has slid 7%.

- Jesse Pound

Energy stocks lead in early trading

The energy sector is outperforming in early trading, with the Energy Select Sector SPDR Fund rising 2.6%.

Chevron has also gained more than 2%, making it the top stock in the Dow.

The stocks could be getting a boost from oil prices. U.S. benchmark West Texas Intermediate crude climbed back above $91 per barrel on Tuesday.

-Jesse Pound

Stocks open lower

Stocks opened lower on Tuesday, as the chip sector is proving to be a headwind for the market this week.

The S&P 500 fell 0.3%, while the Nasdaq Composite dipped 0.9%. The Dow Jones Industrial Average shed 30 points, or 0.1%.

-Jesse Pound

Investors looking ahead to CPI report

Many investors are watching Wednesday's inflation report as a potential pivot point for the market. Economists surveyed by Dow Jones are expecting the July consumer price index report to show a moderation in inflation.

Expectations are for CPI to rise 0.2% month over month, and for core CPI to rise 0.5%. That would be a slowdown from the increases 1.3% and 0.7%, respectively, in June.

"If you get good abatement of inflation, in combination with this historically strong labor market, you can make a case that the June 16 low was a bottom for the market," Kevin Simpson of Capital Wealth Planning said on "Squawk Box." "And I know it sounds crazy, but there's even a possibility that the Fed could thread this needle."

-Jesse Pound

Productivity declines again in second quarter

Productivity declined and labor costs jumped in the second quarter, the Labor Department said Tuesday.

Nonfarm productivity fell at an annual rate of 4.6% during the second quarter, slightly better than the 5.0% decline expected.

Unit labor costs grew at annualized rate of 10.8%, which was higher than the 9.5% expected.

Labor costs are now up 9.5% over the past four quarters, which is the biggest four-quarter increase since 1982.

The decline in productivity and the jump in labor costs were both smaller than revised numbers of -7.4% and 12.7%, respectively.

-Jesse Pound

Bank of America says clients piled into tech stocks last week

Last week, Bank of America Securities clients were net buyers of US stocks for the sixth consecutive week, the firm said Tuesday. Total inflows were $1.8 billion.

The tech sector saw the biggest inflows of the week, with the highest weekly flows since at least 2008, Bank of America said. Overall, buying was concentrated in large cap stocks.

However, the firm did say that hedge funds were net sellers during the period.

— Jesse Pound

Analysts are unusually bullish, Citi says

Despite some high-profile earnings misses and signs of slowing growth in the economy, Wall Street analysts are unusually optimistic about the stocks they cover, according to Citi.

"Our index of global sell-side stock calls is back at peak bullishness, so triggering a red flag in our Bear Market Checklist," Citi strategist Robert Buckland said in a note to clients. "Analysts are most bullish in the US and, increasingly, EM. They are less bullish in Europe and Japan, but not by much. There are few signs they see a global recession coming."

Citi's sell-side index previously reached this peak bullish level in 2007 and 2000, before steep market drawdowns.

— Jesse Pound

Micron shares fall 4% on fresh guidance warning

Shares of Micron tumbled 4% in the premarket after the semiconductor company warned that revenue for the current quarter may fall below or near the lower end of its recent forecast provided on June 30.

The company cited macro and supply chain issues among the reasons for the adjustment.

The news from Micron comes a day after Nvidia released preliminary earnings that showed early second-quarter revenue come in well below initial estimates as the chipmaker grapples with weaker gaming revenue.

Shares of Nvidia slipped about 3% while the iShares Semiconductor ETF slumped 1.5% in the premarket.

— Samantha Subin

Stock futures fall as Micron warns

Stock futures gave up earlier gains and fell into the red after a negative warning from chipmaker Micron and as bond yields crept higher.

S&P 500 futures were down by 0.2% after trading in the green earlier in the overnight session.

-John Melloy

European markets retreat slightly as focus turns to U.S. inflation, Fed outlook

European markets pulled back slightly on Tuesday as focus in global markets turns to a key U.S. inflation print due Wednesday.

The pan-European Stoxx 600 slipped 0.2% by mid-morning, with travel and leisure stocks shedding 1.2% to lead losses while insurance stocks gained 0.8%.

Earnings also remain a key driver of individual share price movement in Europe, with Abrdn, IHG, L&G, Continental and Munich Re among those reporting before the bell on Tuesday.

- Elliot Smith

Hong Kong's exchange receives Alibaba's application for a primary listing

The Hong Kong Stock Exchange has acknowledged Alibaba's application to change its Hong Kong listing status to a primary listing from secondary, according to a filing.

Gaining primary status in Hong Kong would make Alibaba eligible for inclusion in a stock connect program with mainland China.

The Chinese e-commerce giant is also listed on the New York Stock Exchange and will have a dual primary listing on both exchanges if the process in Hong Kong is completed.

The conversion will likely take effect before the end of 2022, the company said.

Shares of the Alibaba in Hong Kong rose 2.42% after that news, which was first announced two weeks ago. U.S.-traded shares of Alibaba were down nearly 2% overnight.

— Abigail Ng, Evelyn Cheng

Novavax shares plunge

Shares of Novavax plummeted 32% in after hours trading after the biotech company cut its full-year revenue guidance roughly in half because of poor demand for its Covid vaccines.

Novavax said it expects to generate $2 billion to $2.3 billion in revenue in 2022, compared to previous guidance of $4 billion to $5 billion in revenue for the year.

— Sarah Min

Stock futures tick higher after Monday's mixed session

Stock futures rose slightly Monday night after the S&P 500 and Nasdaq posted slight losses in regular trading.

Futures tied to the Dow Jones Industrial Average traded 40 points higher, or 0.1%. S&P 500 and Nasdaq 100 futures advanced 0.1% each.

—Fred Imbert

Better-than-expected earnings results

The major averages have rallied this earnings season on the back of better-than-expected results. Of the 439 companies that have reported results through Monday, about 75.3% have beat expectations, according to FactSet.

— Sarah Min