While equities fluctuate, the CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, has traded below 16, lower than expected levels of 19 to 20.
"You thought with such as strong rally (on Monday) it would have come off more," said JJ Kinahan, chief derivatives strategist at TD Ameritrade. "The risk-on trade is basically still there."
The U.S. 10-year Treasury yield held lower on Tuesday at 2.05 percent, while the shorter-term two-year yield climbed to 0.67 percent.
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Futures imply an increase in rates in September with 60.99 percent probability, according to CME Group data. Economists, analysts and money mangers polled by CNBC expect a rate increase in August.
In the little economic data out on Tuesday, housing starts fell 17 percent in February. The 3 percent increase in building permits indicated to most analysts that the drop was seasonal.
Investors will get more insight on the housing market with weekly mortgage applications due at 7 a.m. on Wednesday.
"I think (near zero) rates right now is distorting capital and currency markets," said Jack Ablin, chief investment officer at BMO Private Bank. He "would like to get back to normal rather than these abnormal money conditions."
He said that easing has boosted the equity market as stocks climb higher. But the lack of fundamental economic benefit, in his view, has created "bubble material."
The major U.S. indexes held on to gains for the year Tuesday, but only the Nasdaq closed in the black.
The Dow closed down 128.34 points, or 0.71 percent, at 17,849.08.
The S&P 500 fell 6.91 points, or 0.33 percent, to 2,074.28. The Nasdaq rose 7.93 points, or 0.16 percent, at 4,937.43.
In the commodities market, oil extended declines with crude settling down 42 cents at $43.46 a barrel, the lowest since March 2009.
Crude oil continued to fall late on Tuesday after American Petroleum Institute data showed a larger-than-expected increase in crude inventories, up 10.5 million barrels versus the StreetAccount consensus for 3.07 million barrels.
Investors will watch weekly oil inventories from the U.S. Energy Information Administration, expected Wednesday morning, for further indications on supply.
"If oil continues to fall from there to below $40 a barrel, (it could hit) a lot of leveraged oil companies up and down the production line," said Bruce Bittles, chief investment strategist at RW Baird. "Otherwise, it's a big, big tax cut. More positive than negative."
Unlike most analysts, Bittles expects the weaker economic data to push an interest rate hike to early next year rather than this summer.
Gold futures also extended losses, settling down $5 at $1,148.20 an ounce on Tuesday. The dollar took a break from its rally, as the euro briefly topped $1.06.
Despite the recent negative correlation between U.S. stocks and the strong dollar, several analysts said investors should look beyond currency fluctuations.
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"We do not think the strong U.S. dollar will derail the bull market," Burt White, chief investment officer for LPL Financial, wrote in a note. "The dollar itself is not a key driver of market performance; it is a symptom."