U.S. stocks closed lower Tuesday but reduced the scale of their losses earlier in the session, as a threat of fresh U.S. tariffs along with hopes of a possible peace deal between Ukraine and Russia fueled volatility.

The S&P 500 index dropped as low as 5,528.41 points, falling more than 10% during the session from its record closing high of 6,144.15 on February 19, which is commonly known as a market correction. President Donald Trump said he would double tariffs set to take effect within hours on all imported Canadian steel and aluminum products to 50%.

The latest tariff salvo added to investor unease that Trump's trade policies, which include tariffs against Canada, Mexico and China, could trigger an economic slowdown or cause a recession.

On Monday, the S&P 500 recorded its most significant one-day drop since December 18, wiping out just over $1.3 trillion in market value, and a staggering $4 trillion from its recent peak. The tech-heavy Nasdaq confirmed a 10% correction late last week.

"That creates just angst and nervousness in the market, so you're going to continue to get the 'shoot first, ask questions later' type of reaction, which is exactly what you're getting," said Ken Polcari, chief market strategist at SlateStone Wealth in Jupiter, Florida.

But stocks gained some momentum after the U.S. agreed to resume military aid and intelligence sharing with Ukraine immediately after talks in Saudi Arabia in which Kyiv voiced readiness to accept a U.S. proposal for a 30-day ceasefire in its conflict with Russia, the countries said in a joint statement.

Adding to the positive momentum, Ontario's premier said he had agreed to suspend the Canadian province's 25% surcharge on exports of electricity to Michigan, New York and Minnesota. Trump subsequently said he was now looking at reducing tariffs on Canada.

"The market's looking for something to get hopeful about after the last week or so, but we always say it's hard to make changes based on something that might happen," said Chris Fasciano, chief market strategist at Commonwealth Financial Network in Waltham, Massachusetts.

"So until you see an idea, whether it's Russia, Ukraine, or whether you see what tariffs are finally going to be or what government spending is finally going to be, it's hard to make wholesale changes in portfolios."

According to preliminary data, the S&P 500 lost 42.77 points, or 0.76%, to end at 5,571.79 points, while the Nasdaq Composite lost 33.86 points, or 0.19%, to 17,434.46. The Dow Jones Industrial Average fell 483.98 points, or 1.16%, to 41,427.73.

Global markets have been upended since Trump sparked back-and-forth tariff moves against major trading partners while recent economic data has indicated the economy may be softening. A reading on consumer prices on Wednesday will show if progress is being made on tamping down inflation.

Meanwhile, a U.S. Labor Department report showed job openings increased in January.

Gains were led by the technology and consumer discretionary sectors, the two worst performing of the 11 major S&P sectors on the year.

Tariff uncertainty has also weighed on consumer sentiment, with company executives increasingly flagging the impact it can have on upcoming earnings.

Kohl's forecast a bigger-than-expected drop in annual comparable sales, sending the retailer's shares plummeting.

Dick's Sporting Goods dropped after the retailer forecast downbeat annual results.

Delta Air Lines stumbled after the carrier slashed its first-quarter profit estimates by half.

American Airlines also slumped after the carrier forecast a bigger-than-expected first-quarter loss. Weakness in the airlines helped send the Dow transportation index down 2.5%.

Oracle lost ground after the cloud company missed quarterly revenue estimates.

Citi became the latest brokerage to revise its stance on U.S. stocks, downgrading its recommendation to "neutral."