Wall Street started off September on a sharply lower note on Tuesday as investors weighed the legality of President Donald Trump's tariffs after a federal appeals court ruled most of his sweeping tariffs illegal.

A divided U.S. appeals court ruled on Friday that most of Trump's tariffs are illegal, but allowed for the levies to be in place until October 14. Trump on Tuesday afternoon said his administration will ask the Supreme Court for an expedited ruling on the tariffs.

The appeals court ruling rattled investors on Tuesday after the long Labor Day holiday weekend, with September traditionally a weak month for equities. But the major stock indexes ended off their worst levels of the day.

The Cboe Market Volatility index rose.

With the ruling, "the question becomes, 'Has the Trump administration alienated our trading partners as well as given up the revenue from tariffs?' That's what's plaguing markets," said Oliver Pursche, senior vice president and adviser for Wealthspire Advisors in Westport, Connecticut.

"By the same token, it's too early to call this the beginning of a great correction," he said. "At the end of the day, we all know that August-September tend to be more volatile and a little more challenging for investors before we get into the fourth quarter, which tends to be a pretty solid one."

Data going back decades shows that, on average, September is the worst month for U.S. stocks, and some investors are bracing for another bumpy ride this year. In addition, investors are anxious to see the August U.S. nonfarm payrolls report, due on Friday, and whether weak U.S. job growth continued for a fourth month in August.

According to preliminary data, the S&P 500 lost 45.31 points, or 0.70%, to end at 6,414.95 points, while the Nasdaq Composite lost 176.70 points, or 0.81%, to 21,278.86. The Dow Jones Industrial Average fell 256.02 points, or 0.56%, to 45,288.86.

U.S. rate futures widely expect the Federal Reserve to lower interest rates this month, pricing in a 92% chance of a 25-basis-point cut at the end of the two-day policy meeting on September 17, according to CME Group's FedWatch.

Real estate had among the biggest S&P 500 sector declines on the day, with U.S. 30-year Treasury yields on Tuesday climbing to their highest levels since mid-July. Also, shares of Kraft Heinz fell. The packaged goods giant will split into two listed companies. On the flip side, shares of PepsiCo gained after Elliott Management disclosed a $4 billion stake in the beverages company, launching an activist campaign.