The Dow set its third straight record but the Nasdaq finished lower as investors bought selectively on a steep slide in oil and ahead of earnings reports.
The Dow got a late day push as shares of Intel moved up just before the close on expectations of strong earnings. Energy stocks, meanwhile, sold off as oil dipped to a 20-month low. The S&P 500 finished modestly higher.
"I think everybody is hunkering down waiting to see what earnings season will bring," David Briggs, Head of Global Equity Trading at Federated Investors, told CNBC.com. "We're waiting to see if the earnings justify the rally we've had or if we've gotten ahead of ourselves."
Stocks traded in a tight range much of the day. Concern that the housing slump hasn't bottomed and worries ahead of Intel's earnings report reined in early gains, traders said.
"I personally think the market is showing signs of being real tired," said CNBC's Bob Pisani. "Oil should be helping the market more and it's not. We'll see if Intel can move the market."
Intel reported earnings of 26 cents per share, beating Wall Street's average quarterly estimate. Investors were anxious to see how Intel would compare with rival Advanced Micro Devices which issued a profit warning last week.
Intel's fourth-quarter revenue declined 5% to $9.7 billion, but the company's new high-end processors drove average selling prices higher.
"It sounds to me like Intel may be winning back some share," said Keith Maher, Analyst at BB&T Asset Management, appearing on CNBC's "Closing Bell." "Certainly they have rolled out a great product lineup in the last quarter or so and I think that's what's going on."
After energy, technology was the worst performing sector in the S&P. Though Dow component IBM was a standout, closing at a 5-year-high ahead of its earnings report due out on Thursday. Two brokerage firms downgraded Cisco Systems , and Security software maker Symantec fell after it warned of weaker-than-expected performance in its data center management business.
Airline companies rose on the drop in crude oil. Continental, Southwest Airlines and AMR, the parent company of American Airlines, all rose.
Oil prices hit a new 20-month intraday. New York light crude futures slid to close at $51.21, off three percent, as OPEC members signalled an emergency meeting is unlikely. Saudi Arabia's oil minister said more production cuts were not needed and Nigeria's oil minister said Tuesday that the cartel should wait and see how planned February cuts impact the market
FedEx also helped to lift the Dow transports after JP Morgan upgraded the stock to overweight from neutral.
The drop in crude dragged down shares of major oil companies. Exxon Mobil , ConocoPhillips and Chevron all fell.
Shares of BP also was impacted by a safety report that said the company failed to provide resources to ensure safety at U.S. refineries. The accusation comes from a panel chaired by former U.S. Secretary of State James A. Baker III.
Negative sentiment about the housing market also restrained stocks. Home builder Centex warned it will post a fiscal third quarter loss, saying it is struggling with one of the most challenging housing environments in 25 years. The company said it is reducing its land position and inventory.
As markets look ahead to inflation data Wednesday and Thursday, they received a dose of worse-than-expected manufacturing data. The January Empire State Index dropped to 9.13. Analysts were expecting a drop to 20 from 23.1 in December.
Treasury prices rose on the data, sending yields lower.
Freeport-McMoran Copper & Gold missed earnings estimates, reporting fourth-quarter earnings of $1.99 a share versus the $2.12 a share consensus among analysts polled by Thomson First Call.
Ameritrade said its first quarter profit rose 13.6% or 24 cents a share, beating analysts estimates. The online financial services company credited the rise to an increase in trading commissions, interest revenue and fees from clients.
Wells Fargo reported an increase in earnings of 13% or 64 cents a share, which was in line with analysts expectations.
In corporate news, Dow component Pfizer's new CEO Jeffrey Kindler could cut several thousand jobs in a plan to overhaul the drug maker, The Wall Street Journal reported.
And investors have reacted positively to General Electric's purchase of U.K.-based Smiths Aerospace for $4.8 billion in cash. The deal was announced Monday.