U.S. stocks closed lower Tuesday, as hopes of an oil production cut were dashed and after a miss in the consumer confidence index.
"I think today it was high hopes around the oil minister. … Plus you were at key technical levels in both oil and the S&P," said John Canally, chief economic strategist at LPL Financial.
Saudi Oil Minister Ali al-Naimi said Tuesday at the CERAWeek energy conference that production cuts won't happen, although producers will hopefully meet in March to negotiate an output freeze.
"I think the market now wants to see a cut. The markets are looking for that next step — well you froze production, let's cut it," Canally said.
Energy closed more than 3 percent lower to lead S&P 500 decliners. WTI failed to hold above its 50-day moving average of $32.61 a barrel, while during Monday's rally the S&P never broke its resistance level of 1,950, which is just around the index's 50-day moving average.
Overall trade volume declined for the fourth-straight day to post the second lowest trade volume day of the year, going back to early January.
Stocks extended losses in morning trade after The Conference Board said its consumer confidence index fell to 92.2 in February, down from a downwardly revised 97.8 in January. Analysts polled by Reuters had expected the index to hold near January levels.
"I think obviously the price of oil is giving back part of its gains but I think the fall in consumer confidence is dampening investors' enthusiasm," said Peter Cardillo, chief market economist at First Standard Financial.
Lynn Franco, the economist at The Conference Board who compiled the report, said the decline in consumer confidence in February was due mostly to recent financial market volatility. "There's nothing coming out of this report that suggests consumers see the economy slowing or derailing," she said.
U.S. crude oil futures for April delivery settled down $1.52, or 4.55 percent, at $31.87 a barrel, below Monday's closing price of $33.39 a barrel but a touch above the final price on the March contract of $31.48 a barrel. The March contract rolled to April after the settle Monday.
The Dow Jones industrial average closed about 189 points lower. The index briefly fell 217 points with Goldman Sachs,Chevron and JPMorgan Chase contributing the most to declines. JPMorgan held its investor day Tuesday and its investment banking chief said first-quarter revenues in investment banking fees are down 25 percent, year-over-year.
Home Depot closed nearly 1.4 percent higher, well off session highs but remaining the top contributor to gains in the Dow following encouraging earnings.
The Nasdaq composite underperformed, closing almost 1.5 percent lower as declines in top tech names Apple, Microsoft and Amazon weighed.
"We had a pretty good amount of economic data last week, the majority of which was pretty positive, which I think helped push the market higher, but primarily it's oil doing it," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
"Even the perception of some sort of a cut in production when you're at record high levels gives you some hope that prices will move higher," he said, noting oil prices will need to approach $40 a barrel "for everyone to be happy."
On the data front, the S&P/Case-Shiller 20-city composite home price index showed a 5.7 percent increase year-over-year in December.
U.S. home resales unexpectedly rose in January, reaching a six-month high, in the latest sign that the economy remains on firmer ground despite slowing global growth and tightening financial market conditions, Reuters said.
The National Association of Realtors said on Tuesday existing home sales increased 0.4 percent to an annual rate of 5.47 million units, the highest level since July. Last month's sales pace was also the second highest since 2007.
Treasury yields held lower, with the 2-year yield at 0.73 percent and the 10-year yield at 1.74 percent.
The U.S. dollar traded a touch higher against major world currencies, with the euro at $1.102 after briefly dipping below to hit a near-three-week low against the dollar. The yen traded at 112.08 yen against the greenback.
The Chinese yuan midpoint fix was weaker against the dollar Tuesday at 6.5273 versus 6.5165 Monday, for the biggest cut in six weeks, according to StreetAccount.
Asian equities closed slightly lower, while European stocks were more than 1 percent lower as low oil prices weighed.
Read MoreStreet watching oil, consumer data
"After a strong open yesterday, stocks digested their gains in a consolidation phase that is giving way to a pullback in the S&P futures this morning," BTIG Chief Technical Strategist Katie Stockton said in a note.
"Our indicators suggest that the relief rally still has a hold on the market, but we expect overbought "sell" signals to unfold by Friday," she said. "With this in mind, we would consider taking down exposure into additional strength, which we think could take the SPX closer to a Fibonacci retracement level near 1980 before the rally falters."
U.S. stocks closed more than 1 percent higher Monday, building on their best weekly gain of 2016, as oil prices climbed.
Major U.S. Indexes
Home Depot, the No. 1 U.S. home improvement chain, reported better-than-expected quarterly sales, boosted by an improving housing market and unseasonably warm weather in the holiday quarter.
Macy's reported earnings that beat on both the top and bottom line and gave full-year earnings guidance largely above estimates, Reuters said. The retailer said it expected $900 million in capital expenditures for 2016, less than the approximately $1.1 billion spent in fiscal year 2015. The stock closed up 3 percent.
Read MoreEarly movers: HD, M, TOL, FIT, MSI, UTX, AAPL, MSFT, VRX & more
The Dow Jones industrial average closed down 188.88 points, or 1.14 percent, at 16,431.78, with Chevron leading decliners and Home Depot, Wal-Mart and Nike the only gainers.
The Dow transports closed down about 1.3 percent, with CSX leading decliners and Avis Budget the top gainer.
The closed down 24.23 points, or 1.25 percent, at 1,921.27, with energy leading nine sectors lower and utilities the only advancer.
The Nasdaq composite closed down 67.02 points, or 1.47 percent, at 4,503.58.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held just below 21.
About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 942 million and a composite volume of 3.9 billion.
Gold futures for April delivery settled up $12.50 at $1,222.60 an ounce.
—CNBC's Chris Hayes and Reuters contributed to this report.
On tap this week:
Tuesday
Earnings: Home Depot, Bank of Montreal, JM Smucker, Macy's, Norwegian Cruise Line, Toll Brothers, Angie's List, Cracker Barrel, Avis Budget, Jazz Pharma, Dreamworks Animation, Etsy, First Solar, Popeyes, WebMD Health
8:30 p.m. Fed Vice Chairman Stanley Fischer
Wednesday
Earnings: Lowe's, Chesapeake Energy, Mobileye, Target, TJX Cos., HP, L Brands, NetEase, Salesforce.com, Transocean
8 a.m. Richmond Fed President Jeffrey Lacker
9:45 a.m. Services PMI
10 a.m. New home sales
10:30 a.m.: Oil inventories
1 p.m. $34 billion five-year notes
7 p.m. St. Louis Fed President James Bullard
Thursday
G-20 finance ministers meet in Shanghai
Earnings: AB InBev, Bayer, Apache, Best Buy, Campbell Soup, Domino's Pizza, Kohl's, Chico's FAS, Sears Holdings, SeaWorld, Baidu, Autodesk, Gap, Intuit, Kraft Heinz, Herbalife, Live Nation Ent., Noodles & Co., Weight Watchers
8:15 a.m. Atlanta Fed President Dennis Lockhart
8:30 a.m. Initial claims; durable goods
9 a.m. FHFA home prices
10:30 a.m.: Natural gas inventories
11 a.m.: Kansas City Fed Manufacturing Index
12 p.m. San Francisco Fed President John Williams
1 p.m. $28 billion seven-year notes
Friday
G-20 meets in Shanghai
Earnings: J.C. Penney, Foot Locker, Sotheby's, Sempra Energy, AmericanTower, Centerpoint, Liberty Media, Telefonica, Rowan Cos
8:30 a.m. Real GDP Q4 (second reading); international trade
8:30 a.m.: Personal income, consumer spending
10 a.m. Consumer sentiment
Saturday
Earnings: Berkshire Hathaway
*Planner subject to change.
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