Stocks failed to hold gains after a strong rally, as oil's late-day plunge overshadowed the bounce in tech, transports and industrials.
Oil sank, with Brent and West Texas Intermediate both down more than 4 percent after the International Energy Agency cut its forecast for oil demand and said prices may drop further. More than a dozen energy names in the S&P 500 hit new 52-week lows, and the S&P energy sector fell into bear market territory Tuesday, with a more than 20 percent decline from its highs.
Meanwhile, the Dow transports jumped more than 2 percent, as airlines recovered some of the losses made on fears of a wider Ebola outbreak hampering travel. FedEx and UPS, companies that also benefit from lower energy prices, rose, as Delta, UAL, Southwest and JetBlue moved higher.
Art Cashin, director of floor operations at UBS, noted the S&P 500 on Tuesday rallied to 1,898, near resistance before falling back. He pointed out that the morning high was just around the level stocks were trading at Monday before a sharp drop in the 3 p.m. hour.
A final leg down in oil prices in afternoon trading shaved much of the market's gains, and the Dow turned slightly lower after an earlier triple-digit gain. Stocks were attempting to recover after the worst three-day selloff since 2011. The S&P 500 closed slightly higher, up nearly 3 points at 1877.
WTI crude fell 4.6 percent to $81.84, in its biggest percentage drop since November 2012 and the lowest settle price since June 2012.
Oil's drop accelerated into the NYMEX close. "The question is are these fears of slowing economic conditions and good supply...are they lasting enough to keep the market here," said Gene McGillian, an analyst with Tradition Energy.