U.S. stocks fell on Tuesday as benchmark Treasury yields climbed to their highest level since 2007, putting pressure on risk assets. The Federal Reserve's highly anticipated interest rate decision is scheduled for Wednesday, with traders widely expecting a hike.

The S&P 500 slipped 0.5%, while the Nasdaq 100 dropped 0.7%. The 10-year Treasury yield added 4 basis points to reach 5.03%, a level not seen in nearly two decades, before easing back to 5.01%.

"Equities now face genuine competition from risk-free assets," noted Mark Malek, chief investment officer at Muriel Sieber & Co. "With investors able to earn roughly 5% without taking on stock market risk, stocks must justify their valuations with higher expected returns."

Oil prices also weighed on the market, with Brent crude climbing above $108 per barrel. Analysts at UBS, led by David Lefkowitz, wrote in a client note that persistently elevated borrowing costs are placing downward pressure on equity valuations.

A survey from Bank of America showed cooling optimism around risk assets, as investors grow concerned about disorderly surges in bond yields and the outcome of the upcoming U.S. midterm elections.

Among individual movers, Nvidia shares outperformed the so-called "Magnificent Seven" tech stocks after CEO Jensen Huang received a phone call from the U.S. president during a panel discussion on Monday. JPMorgan rose 0.7%, reversing earlier losses, after the bank projected growth in third-quarter trading revenue and investment banking fees.

At the close, the S&P 500 was down 0.5% at 7,585.73 points, the Dow Jones Industrial Average fell 0.6% to 52,093.11 points, the Nasdaq Composite declined 0.8% to 25,981.57 points, the Nasdaq 100 shed 0.7% to 28,937.84 points, and the Russell 2000 dropped 0.8% to 2,870.285 points.