The Dow Jones Industrial Average tumbled 102.09 points, or 0.78 percent, to close at 12,927.17, led by Wal-Mart and Bank of America . The blue-chip index was down more than 180 points at its session low.

ExxonMobil rose on the Dow after Raymond James upgraded the energy giant to "outperform" with a $100 price target.

The S&P 500 declined 11.59 points, or 0.84 percent, to finish at 1,366.94. The Nasdaq erased 30.00 points, or 1.00 percent, to end at 2,970.45.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, briefly spiked above 20 earlier in the session before finishing near 19.

All 10 S&P sectors ended lower, led by materials and consumer staples.

“If you’re sitting on cash, you want to wait for the consolidation to pass,” advised Quincy Krosby, market strategist at Prudential Financial on CNBC’s "Power Lunch." “We always talk about how the market needed to pull back, then when you finally have it, everyone gets nervous.”

Krosby said she remains “constructive” on the U.S. market and expects investors to pile in once the market volatility diminishes.

In Europe, French President Nicolas Sarkozy finished second in the first round of elections in France, trailing his rival, Socialist leader Francois Hollande. It is the first time an incumbent French president has come in second in the first-round vote in the present electoral system’s 54-year history. The second round will be held in two weeks.

Meanwhile, budget talks in the Netherlands fell apart over the weekend, raising concerns over the country's ability to hold its triple-A credit rating and prompting Prime Minister Mark Rutte to resign from his post. AndGermany's manufacturing sector unexpectedly declined at the fastest pace in nearly three years in April.

China's factories posted their best performance this year as a measure of new business rose from multi-month lows, according to a PMI survey, though overall activity still contracted for a sixth month.

Wal-Mart plunged after bribery allegationsat the big-box retailer's Mexican affiliate surfaced over the weekend. The company could see years of regulatory scrutiny and some executives could eventually lose their jobs. Still, Citigroup raised its price target on the retail giant to $71 from $69 a share.