After rising nearly 46 points early on and falling as much as 123 points, the Dow Jones Industrial Average eased its decline, finishing down 24.8 points, or 0.2 percent, at 15,889.7.
"Hopefully we'll get some agreement on a budget deal, which would take that worry away of a reenactment of what we saw in October. There seemed to be some thoughts of less headwinds from the sequester piece, though not as much as hoped, and some relief on the spending side," said Dunigan of reports of some progress in negotiations on Capitol Hill.
Dunigan also cited as supportive of equities a Bloomberg story that had Laurence Fink advising pension funds to invest more in stocks, with the BlackRock CEO saying equities are the only way for the funds to meet their obligations in a low-rate environment.
The S&P 500 lost 2.34 points, or 0.1 percent, to 1,792.81.
The Dow and S&P 500 both posted their first four-day losing streak since Sept. 25, and were also on pace to halt an eight-week winning streak.
Hewlett-Packard's shares rallied after the computer maker said it would cut 27,000 workers around the globe by the end of next year.
The Nasdaq rose nearly 1 point to 4,038.
Plug Power was among the components rallying after the fuel-cell maker said it anticipates turning a profit next year.
The CBOE Volatility Index (VIX), a gauge of investor uncertainty, rose to within reach of 15.
For every share rising, nearly two fell on the New York Stock Exchange, where 756 million shares traded. Composite volume surpassed 3.6 billion.
The U.S. dollar held steady against other currencies, while dollar-denominated commodities gained. Crude futures climbed to $97.20 a barrel and gold futures rose from a five-month low to $1,247.20 an ounce.
"We're hoping after the first of the year the market goes back to trading on fundamentals and earnings growth. In the short run, it still seems to be trading on interest rates," said Mike Serio, chief investment officer at Wells Fargo Private Bank.
Once the Fed starts cutting its $85 billion in monthly bond purchases, the market will "transition very quickly to wanting the economy to do better," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.