* BOJ keeps policy steady, disappointing investors
* Lululemon tumbles after CEO says to step down
* Dole Food jumps after CEO proposes buyout
* Dow off 0.4 pct, S&P down 0.6 pct, Nasdaq down 0.6 pct
U.S. stocks fell in a volatile session on Tuesday after Japan's central bank disappointed equity markets by holding steady its monetary policy.
Major indexes fell more than 1 percent after the open but had shaved most of the losses by midday, only for the selling to resume towards the session's end.
Financial and energy shares led the way down on the S&P 500 while defensives including consumer staples and telecom services fared better.
The decision by the Bank of Japan roiled markets across asset classes as trades built around central bank support of major economies have begun to unwind in the last weeks, sparking volatility. U.S. Treasury yields hit fresh 14-month highs, equities dropped globally and the yen soared.
Investors in U.S. markets have become more nervous in recent weeks over when the Federal Reserve may slow its accommodative measures, which have been a pillar of the S&P 500's performance this year.
"A lot of what has fueled the rally in equity indexes has been a combination of improvement in earnings and the economy, but in the background there was always the idea that easy money was helping elevate asset prices," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
"We are now hearing from various central banks it is possible that expectations for the future are needing to be dampened down a little," he said. "By not following through with more substantive easing, the BOJ adds to this, and weaker equity markets around the world are reflecting this unease."
The Dow Jones industrial average fell 64.47 points or 0.42 percent, to 15,174.12, the S&P 500 lost 10.21 points or 0.62 percent, to 1,632.6 and the Nasdaq Composite dropped 22.33 points or 0.64 percent, to 3,451.44.
The Bank of Japan announced in April a $1.4 trillion stimulus program, and while it left the door open to more action if borrowing costs spike, that was not enough to appease investors.
The S&P 500 is up about 15 percent since the start of the year, but markets have been bumpier since comments from Fed Chairman Ben Bernanke last month sparked uncertainty over the central bank's timeline for slowing its $85 billion a month bond purchase program.
Among individual companies, shares of Lululemon Athletica slumped 16.9 percent to $68.39 after the company's chief executive said she will step down once a replacement is found.
Dole Food Co jumped 22.3 percent to $12.47 after the company received an unsolicited buyout offer from its chief executive.
U.S.-traded shares of pharmacy benefit manager Catamaran Corp jumped 10.5 percent to $53.77 as at least six brokerages raised their price target on the Canadian company after it signed a 10-year agreement with health insurer Cigna Corp.
SoftBank Corp said it agreed with Sprint Nextel Corp to raise its offer for the U.S. wireless carrier to $21.6 billion from $20.1 billion. Sprint was up 2.5 percent at $7.36.