A resetting of the likely timing of the first Federal Reserve Funds Rate hike since June 2006 was the main driver for Tuesday's selling in equities, analysts said.

"Expectations for the Fed to begin raising rates were being pushed out to the fourth quarter and what we are seeing is a temporary adjustment to the fact they may come as soon as June," said Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. Intermediary Business in Boston.

A Reuters poll after an unexpectedly strong February U.S. jobs report Friday showed many of Wall Street's top firms were now more convinced the Fed will raise rates in June.

"The longer term trend is still in place for stocks and risk assets to do well,” said Arone, citing ample liquidity generated by easing monetary policy in many central banks around the globe.

The benchmark S&P 500 stock index tumbled to close at its lowest in more than a month and in negative territory for the year so far. Concerns over Greece added to the bearish mood on Wall Street, as technical negotiations intended to prevent Greece going bankrupt will start on Wednesday.

The Dow Jones industrial average <.DJI> fell 332.78 points, or 1.85 percent, to 17,662.94, the S&P 500 <.SPX> lost 35.27 points, or 1.7 percent, to 2,044.16 and the Nasdaq Composite <.IXIC> dropped 82.64 points, or 1.67 percent, to 4,859.80.

Nikkei futures were down 1.7 percent. An MSCI gauge of stocks across the globe <.MIWD00000PUS> fell 1.7 percent, the most for any session in more than two months.

The European Central Bank's new bond-buying campaign helped push the U.S. dollar higher, as did speculation the Fed will start lifting rates from mid-year.

The euro was last down 1.4 percent at $1.0696 after hitting $1.0691, the lowest in almost 12 years. [FRX/]

"We’re seeing a generally hawkish tone out of the Fed," said Chris Gaffney, president of EverBank World Markets in St. Louis.

"There is a real desire from the Fed to just start the process, to get rates off zero," he said.

The prospect of rising U.S. yields threatened to draw funds away from emerging markets. The Mexican peso fell as much as 1.1 percent to hit a record low of $15.6452.

OIL SLIPS, YIELDS FALL

A further drop in producer prices in China overshadowed data that showed consumer prices there rose 1.4 percent in February year on year. Much of the increase, however, was due to seasonal volatility in food prices.

Commodities continued to struggle with the strength of the dollar, in which most are priced. Gold hit a three-month low near $1,155 an ounce, falling for a seventh-straight session. Copper futures fell 1.8 percent.

Brent crude fell 3.4 percent to a near 1-month low of $56.55 a barrel, while U.S crude dropped 2.6 percent to $48.71.

U.S. Treasury debt yields were pulled lower, with benchmark 10-year U.S. Treasury notes last up 19/32 in price to yield 2.1279 percent, compared with 2.195 percent late Monday.

(Additional reporting by Sam Forgione, Barani Krishnan and Richard Leong; Editing by James Dalgleish and Chris Reese)

By Rodrigo Campos