His exit in the first bout of the day set the tone as heavyweight Michael Hunter II and inexperienced super-heavyweight Dominic Breazeale lost to Russian duo Artur Beterbiev and Magomed Omarov respectively.
It leaves the USA with just four fighters from the nine who started out.
Having looked good to improve on their poor record of just one gold medal since the 1996 Games -- Andre Ward in 2004 -- those odds have shifted more towards them finishing without a medal for the second successive Games.
Diaz was extremely unfortunate with the Games draw as he and Alvaro are two of the highest-rated at their weight but the 19-year-old American, the youngest member of the team, took defeat in his stride.
"It's an unfortunate defeat but I went out there to put on a show which I succeeded in doing," said Diaz, who has been strongly linked with the 1992 lightweight Olympic champion Oscar de la Hoya's Golden Boy Promotions.
"Unfortunately I couldn' get the 'W '.
"He is a great fighter. He's a really great counterpuncher, really smart and I hope he gets the gold medal."
Alvaro, who looks good odds to help his country erase the memory of Beijing where none of their eight medals were gold, admitted Olympic debut nerves had affected him initially.
"You always feel pressure on your debut. These are my first Olympic Games but I knew well how to resolve the difficult situations presented to me in the ring," he said.
Hunter had looked to be on course for a major scalp against an opponent, who is a former world light heavyweight champion, but fatigue set in in the final round and he lost on countback after the bout ended 10-10.
It spelled the end for Hunter too of his amateur career which had failed to reward him with the gold medal that he had promised to his late father.
"I am very disappointed as I had always promised my father before he died that I would win an Olympic gold medal," said Hunter.
"There won't be another chance as I'm done with the amateur game, I've been around it a long time, and I'm going to turn pro."
Breazeale was the only one of the trio never on equal terms as the lack of experience of the one time quarterback, who had a short trial with the New York Giants, showed against European super heavyweight champion Omarov in a 19-8 thrashing.
Breazeale, who switched sports 3 1/2 years ago, laughed when asked whether his good looks prevented him from pushing hard for victory for fear of damaging them.
"Well Muhammad Ali had a pretty face and as far as I can recall he won a few things."
While the Americans licked their wounds the hosts Great Britain celebrated with two victories bookending the evening session.
Bantamweight Luke Campbell warmed up the crowd with a narrow win over Italian Vittorio Parrinello.
However, the best was saved to last as classy super heavyweight Anthony Joshua, like Campbell a world silver medalist, edged Cuban Erislandy Savon, the cousin of the legendary three-time Olympic champion Felix, 17-16.
"It's always good to get the cobwebs out of the system," said the 22-year-old winner.
"It was a tough fight and a good one to have first up as he's a good fighter and we both took some shots."
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