US stocks declined in early trade on Tuesday as a fresh exchange of fire between North Korea and South Korea overshadowed better-than-expected reading on economic activity.

The S&P 500 Index declined 14.48 points, or 1.19 percent, to trade at 1,183.53 at 9:40 a.m. EDT. The Dow Jones Industrial Average declined 119.05 points, or 1.06 percent, to trade at 11,059.53. The Nasdaq Composite Index dipped 1.07 percent.

North Korea shelled a South Korean island, triggering worries that the lingering tensions between the countries could worsen. On Tuesday North Korea said it was South Korea which fired first and that they had to fire in retaliation. It added that the North's military will continue to make merciless military attacks with no hesitation if the South Korean enemy dares to invade our sea territory by 0.001 mm.

The Commerce Department reported that real Gross Domestic Product, the broadest measure of economic activity and a key indicator for the economy's health, rose at an annual rate of 2.5 percent in the third quarter of 2010, faster than the 2 percent rate projected last month. In the second quarter, the economy grew at a 1.7 percent annual rate.

The Federal Open Market Committee will release the minutes from its November meeting at 2 p.m. ET. Investors expect that the minutes will reveal more details regarding the $600 billion extension of its stimulus program.

Among the Dow components, Alcoa, Chevron and Exxon Mobil declined more than 2 percent, while the only gainer HP advanced 1.27 percent as it reported 5 percent growth in quarterly profit and raised its fiscal 2011 forecast.

Shares of Campbell Soup Co. declined 1.18 percent after reporting 8 percent fall in its first quarter profit as it spent heavily to market its products and it expects margin pressures to persist through the second quarter.

The euro declined 1.15 percent to 1.3470 against the dollar on debt concerns and the yen gained 0.30 percent against the greenback.

Crude oil futures declined 1.10 percent to $80.84/barrel and gold futures advanced 0.57 percent.

European stock markets are currently trading lower with FTSE 100 down by 52.19 points, DAX30 down by 56.62 points and CAC 40 down by 62.45 points.