U.S. stocks declined on Tuesday, with the S&P 500 retreating from a record for a second day, as geopolitical concerns overshadowed better-than-expected reports on housing and consumer confidence.
Worries about violence in Iraq and the recent rise in oil prices is "the overall theme that is weighing," said JJ Kinahan, chief strategist at TD Ameritrade.
"Keep in mind the direct tax that everybody's budget takes when the price of oil is up significantly. It could have a direct effect on our economy," Kinahan added.
The CBOE Volatility Index, one measure of investor uncertainty, spiked nearly 11 percent to 12.16.
"We had more volatility in the last 20 minutes than we had in the last two weeks," said one trader, referring to the early afternoon reversal, which came after Dow Jones News Service reported Syrian warplanes struck targets in western Iraq on Tuesday, killing at least 50 people, as Syria joined Iran in coming to the aid of the embattled Baghdad government.
"We're hearing some attacks with Syria and Iraq and what not," Stephen Carl, head equity trader at the Williams Capital Group, said of the market's about face, which had the Dow erasing a 32-point gain and tumbling more than 130 points.
In Iraq, U.S. Secretary of State John Kerry urged Iraqi leaders to form a united front against insurgents now in control of portions of the second-largest oil producer in OPEC.
Walgreen shares fell after the drugstore chain reported a 16 percent rise in its fiscal third-quarter earnings from the year-earlier period, but still missed expectations. Dean Foods rose after the Wall Street Journal cited unidentified sources in reporting Federal authorities had asked for information related to an insider-trading probe of investor Carl Icahn from the food-and-beverage supplier. Vertex Pharmaceuticals surged after a combination of drugs to treat cystic fibrosis improved lung function in a pair of late-stage clinical trials.