Stocks struggled to hold onto gains as energy stocks rose along with oil prices. But consumer-discretionary stocks dragged on the market after a disappointing consumer-confidence report.
Stocks had opened higher after upbeat housing and earnings reports and as the dollar retreated, then fell after the confidence report, and have struggled to hold gains ever since.
In afternoon trading, the Dow was higher but the S&P and Nasdaq declined.
Volatility is also returning to the market: The CBOE volatility index, widely considered the best gauge of fear in the market, ticked higher to near 25.
The stock market has become overheated since rebounding off its March lows and is due for a correction, said David Rosenberg of Gluskin Sheff. Rosenberg used to be the chief economist at Merrill Lynch.
The market "is overvalued by at least 20 percent," Rosenberg said on CNBC this morning. "But it comes down to what your view in corporate earnings (is) going to be. By the time you're up 60 percent from any egregiously oversold low, you've already got the earnings recovery."
The Conference Board's gauge of consumer confidence fell to 47.7 in October from an upwardly revised 53.4 in September. Economists had expected the gauge to hold steady.
Consumer discretionary stocks took a hit from the report: Wynn Resorts, clothing retailer VF Corp. and Starbucks were among the sector's biggest decliners.
The S&P/Case-Shiller home-price index rose for a fourth straight month, beating expectations.
The dollar pulled backas traders booked profits from Monday's gains, which spurred the selloff in stocks.
On Monday, the Dow posted its first back-to-back triple-digit drops since June as the markets were impacted by a rising dollar, falling commodity prices, and other factors.
Banks including Bank of America and JPMorgan led that selloff, along with commodities stocks including Alcoa . Both sectors rebounded at the start of today but weakness began to seep into both by late morning.
There was a lot of weakness in techs but IBM was one of the bright spots after the computer and services company said it was adding $5 billion to its stock-repurchase plan, bringing the total to $9.2 billion.
Energy stocks including ExxonMobil and Chevron advanced as oil pushed toward $80 a barrel. Both of those companies are set to report earnings later this week.
In today's earnings news, TD Ameritrade and US Steel were among companies reporting earnings that beat analyst expectations.
US Steel posted a loss of $2.11 a share that was considerably less than the $2.87 that analysts expected. TD Ameritrade posted a $0.26 profit on record organic growth.
Energy giant BP also contributed to the move higher, posting a profit drop of 34 percent that beat analyst estimates, driven by aggressive cost-cutting.
The government continues its record week of auctions with the sale of $44 billion in 2-year notes, with the results available shortly after 1 pm New York time. On Wednesday will see the sale of $41 billion in 5-year notes, followed by $31 billion in 7-year notes on Thursday.
Some encouraging news from the auto sector, as Honda nearly triples its yearly profit forecast.
At the same time, we're hearing about a slight setback for Ford , as UAW workers at its Kansas City assembly plant vote against the tentative contract changes designed to bring Ford's costs in line with those at GM and Chrysler.
Still to Come:
WEDNESDAY: Weekly mortgage applications; durable-goods orders; new-home sales; weekly crude inventories; executive-compensation hearing; Earnings from ConocoPhillips, GlaxoSmithKline and General Dynamics
THURSDAY: 80th anniversary of 1929 market crash; Weekly jobless claims; first look at Q3 GDP; Larry Summers speaks in NYC; Earnings from AstraZeneca, ExxonMobil, P&G, Aetna, Kellogg, Motorola and Sprint Nextel
FRIDAY: Personal income and spending; consumer sentiment; Earnings from Chevron
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