Futures for the S&P 500 fell 0.58 percent in early trading, while Australia's S&P/ASX 200 futures and Japan's Nikkei 225 futures lost 0.29 percent and 0.17 percent, respectively.

Wall Street had initially moved higher on Tuesday on news that President Trump had returned to the White House from his COVID-19 hospitalization, removing some of the political uncertainty that hit investor sentiment last week.

However, those gains sharply reversed when the president announced on Twitter that he had halted negotiations for additional stimulus until after the election.

Reviving the political uncertainty, a growing number of senior US government official have tested positive for coronavirus after President Trump disclosed his own diagnosis. Most recently, most members of the Joint Chiefs of Staff stopped in-person meetings and went into quarantine after a coast guard official tested positive.

Earlier on Tuesday, Federal Reserve Chairman Jerome Powell warned that the world’s largest economy was in for a weak recovery without more fiscal support.

Central bank watchers will get a more detailed look at board members’ views on the economy when the Fed releases its minutes early Wednesday.

The Dow Jones Industrial Average fell 1.34 percent, the S&P 500 lost 1.40 percent and the Nasdaq Composite dropped 1.57 percent.

MSCI's gauge of stocks across the globe shed 0.64 percent.

Spot gold also fell on the news, dropping 1.4 percent to US$1,886.01 per ounce by the end of the session and continued to slide after hours.

Tuesday’s declines may have been an overreaction as some market players had already priced in a failure in talks between Republicans and Democrats.

“Our view for some time was a stimulus agreement was unlikely before the 3 November presidential election,” Head of International Economics at Commonwealth Bank of Australia Joseph Capurso said in a note.

The Trump administration’s about-face also fueled safe-haven demand for the dollar and US Treasuries.

The dollar index rose 0.468 percent, with the euro down 0.04 percent to $1.1729.

On Tuesday, US 10-year yields rose to 0.773 percent from 0.762 percent late on Monday while 30-year yields grew to 1.585 percent, up from 1.567 percent.

Oil prices closed higher as hurricanes off the Gulf of Mexico and a worker strike in Norway threatened to curb supply, but post-close trading points to a lower open.

Brent crude futures fell to $42.19 a barrel in after-hours trading after settling at $42.65, and US West Texas Intermediate (WTI) crude dropped to $40.13 a barrel from $40.67.

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