U.S. stocks fell on Tuesday as investors braced for what is expected to be another dismal earnings season and the specter of bankruptcy at General Motors resurfaced.

After an abysmal fourth-quarter earnings season, investors are expecting another weak round of results, starting with aluminum producer Alcoa Inc after the market close on Tuesday.

The story today is going to be Alcoa earnings, said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston. I don't expect any upside surprises. Alcoa has reported very little in the last few quarter to be cheerful about.

Tuesday's slide reflected earnings worry and the fact that we've had a run and people are probably looking to consolidate some of the gains, Zaro said.

Alcoa shares fell 1.1 percent to $7.82.

Earnings for S&P 500 companies are expected to fall by 36.7 percent, according to Thomson Reuters data.

Shares in General Motors Corp fell 10 percent after a source familiar with the company's plans told Reuters the company was in intense and earnest preparations for a possible bankruptcy filing.

The Dow Jones industrial average <.DJI> dropped 160.41 points, or 2.01 percent, to 7,815.44. The Standard & Poor's 500 Index <.SPX> fell 14.45 points, or 1.73 percent, to 821.03. The Nasdaq Composite Index <.IXIC> lost 28.54 points, or 1.78 percent, to 1,578.17.

Despite recent declines, the S&P 500 is up more than 21 percent since hitting a bear market closing low on March 9, as hopes rose the economic slump is moderating and banks are stabilizing as policy-makers continue an aggressive campaign to shore up the system.

The news on a possible GM bankruptcy weighed on market sentiment.

We really don't know what the effect (of GM bankruptcy) will be on suppliers and the economy -- the figure of GM reaches deep into the economy, said Zaro.

Shares of GM fell 9.7 pct to $2.05, while auto suppliers such as Lear Corp dropped 7.8 percent to 95 cents. Ford Motor Co fell 6.6 percent to $3.52. The Dow Jones Auto Parts <.DJUSAT> index lost 1.8 percent.

Chevron and Exxon Mobil were among the top drags on the Dow as U.S. crude oil futures fell below $50 a barrel on a stronger dollar and caution ahead of inventory data.

Chevron fell 2.2 percent to $68.36 while Exxon Mobil dropped 2.5 percent to $68.31.

Also weighing on sentiment was a report that the International Monetary Fund was set to forecast toxic assets on the balance sheets of financial corporations could reach $4 trillion.

Tuesday was the second day of declines after stocks rallied off 12-year lows in the last month, partly on reassuring comments from major banks about their performance in the beginning of the year.

The KBW Bank <.BKX> index shed 2 percent.

Microsoft rose 1.2 percent to $18.98 and was the top performer on both the Dow and Nasdaq 100 after RBC Capital Markets upgraded it to outperform from sector perform, citing more reasonable valuations and a decreased risk to negative earnings revisions.

(Editing by Leslie Adler)