Stocks were flat to slightly lower as tech leaders slipped, banks fell and the economy showed that a recovery could be slow in coming.
The Nasdaq showed the most weakness, falling nearly 1 percent as the market looked to rebound from a rough showing Monday. The Dow edged into positive territory but stocks primarily were trading in a tight range as investor uncertainty grew following the market's aggressive two-month rally.
A government report showed the US trade deficit growing to $27.6 billion, somewhat lower than expected and raising concerns about consumer weakness reflected in decreasing demand for foreign goods.
Banks again were in focus as major institutions reacted to stress test results released last week. Shares opened higher but quickly turned negative as investors grew jittery over the industr. Noted analyst Meredith Whitney told CNBC on Monday that she would not own bank stocks.
Citigroup shares were weak after saying it was using $45 billion in Troubled Asset Relief Program (TARP) funds to make new loans.
Bank of America also edged lower following its announcement it will sell $7.3 billion of its stake in China Construction Bank.
Bank of New York Mellon slipped after raising $1.2 billion in new shares at $28.75. The drop, though, mostly reflected the offering price.
And US Bancorp shares fell after the company filed a prospectus with the Securities and Exchange commission saying it planned to sell up to $1 billion in senior notes but did not detail how it planned to use the money.
Overall, the KBW Bank Index was off about 2.5 percent after the first half-hour of trading.
The sense of unease came as Atlanta Federal Reserve Bank President Dennis Lockhart said market conditions for financials was better than at the height of the credit crisis last year but the problems are far from over.
"I believe that conditions are now calmer but it is too soon to breathe easy," he said in remarks to a conference organized by his institution.
Health-care leaders Pfizer and Merck helped mitigate Dow losses, while Kraft Foods also gained on the bluechip index.
Outside the sector, Ford Motor shares fell after the automaker said it will sell 300 million common shares, in part to raise cash to pay off health-care obligations.
And General Motors shares tumbled as the company continues its seemingly inexorable trudge towards bankruptcy. Six GM executives revealed after the bell Monday they dumped direct holdings in the company, shedding $315,000 in common stock.
On the Nasdaq tech gauge, Yahoo and Starbucks both dropped as short interest in the two companies grew in the second part of April.
Semiconductor firm Nvidia also saw its shares continue to slip off a weak earnings report last week.
Oil prices mirrored the growth in stocks, with the price of US light, sweet crude touching the $60 mark at one point.