Stocks fell sharply on Tuesday as U.S. Treasury yields rose to early pandemic-era highs, while disappointing earnings from Goldman Sachs (GS  ) further dragged the market lower. The Dow Jones Industrial Average was the biggest loser, falling over 540 points, while the S&P 500 and Nasdaq dropped by 1.8% and 2.6%, respectively.

U.S. Treasury yields increased on Tuesday following the extended weeknd, with the 2-year yield climbing above 1% for the first time since Feb. 2020, or the month the coronavirus pandemic began to impact Wall Street. The 10-year yield also rose, topping 1.87%, its highest since Jan. 2020.

Here's how the market settled to start the shortened week:

S&P 500 Index (SPY  ): -1.84% or -85.74 points to 4,577.11

Dow Jones Industrial Average (DIA  ): -1.51% or -543.34 points to 35,368.47

Nasdaq Composite Index (QQQ  ): -2.60% or -386.86 points to 14,506.90

Home builder confidence dips in January:

Confidence among single-family homebuilders in the United States declined in January following four straight months of growth, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index showed on Tuesday.

The month's reading fell by one point to 83. However, readings above 50 indicate that more builders view conditions as good rather than poor.

According to the NAHB, increasing material costs and shortages are adding weeks to typical single-family construction times.

"NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021," NAHB Chair Chuck Fowke said in a statement. "Policymakers need to take action to fix supply chains. Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start."

Microsoft set to acquire Activision Blizzard in $68.7 billion deal:

Microsoft (MSFT  ) announced Tuesday it will buy video game giant Activision Blizzard (ATVI  ) in an all-cash deal valued at $68.7 billion, meaning the tech giant will pay $95 per share, marking its largest takeover yet.

Activision's stock ended the trading day up more than 25%, closing at $82.31 per share on Tuesday. Under the deal, Activision CEO Bobby Kotick will remain in charge during the transition. Microsoft said that the game company will report to Xbox chief Phil Spencer after the deal closes.

Microsoft said it expects to close the deal in its fiscal 2023. At the deal's close, Microsoft is set to become the world's third largest gaming company by revenue, following just behind Tencent (TCEHY  ) and Sony (SONY  ).

Here's how market benchmarks started trading soon after open:

S&P 500 Index: -1.46% or -68.15 points to 4,594.70

Dow Jones Industrial Average: -1.53% or -550.15 points to 35,361.66

Nasdaq Composite Index: -1.91% or -284.99 points to 14,608.77