The Dow pulled off its fourth-straight gain, led by DuPont after better-than-expected earnings from the chemicals maker. But the gain was more modest than in recent sessions as a drop in consumer confidence tempered investors' enthusiasm.
Financials rose, while energy and consumer-discretionary stocks were among the weakest links.
DuPont led the Dow pack, followed by Hewlett-Packard and Pfizer .
The Conference Board delivered the latest sign that consumers are getting weary: Their gauge of consumer confidence fell to 50.4in July from 54.3 in June; economists surveyed by Reuters had expected the index to drop to 51.
Consumer spending is crucial to the economic recovery as it accounts for more than two-thirds of economic activity.
"Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves," said Lynn Franco, director of the Conference Board Consumer Research Center. "Given consumers' heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season."
Consumer-discretionary stocks were among the worst performers, with Gap and Best Buy both down more than 3 percent.
Teen chains Abercrombie & Fitch and Delia*'s fell almost 3 percent.
Walmart shares slipped after brokerage Stifel Nicolaus downgraded the retail giant to "hold" from "buy."
"We simply expect Wal-Mart will be 'turning the battleship' for some time due to recent managerial changes," analysts said.
Meanwhile, Stifel upgraded wholesaler Costco to "buy" from "hold."
In the day's other economic news: Home prices rose more than expectedin May, according to the latest Standard & Poor's/Case Shiller home-price indexes.
The latest batch of earnings showed a more optimistic picture than the economic data:
DuPontbeat earnings estimates and raised its forecast.
Lockheed Martin also topped forecasts amid higher revenues and improved margins, and forecasted higher full-year results.
And financials were among the day's best performers, with Bank of America and JPMorgan trading higher, after a few solid results out of the sector.
Regions Financial posted a smaller-than-expected loss, offering a sign that its credit problems may be easing. This came after strong earnings from Swiss bank UBSand from Germany'sDeutsche Bank.
But market pros cautioned that earnings alone won't be enough to stimulate markets.
"Earnings are one leg of the stool, unfortunately," said Jack Ablin, CIO of Harris Private Bank. "Profits can only go so far if there’s no jobs being created."
Ablin recommended that investors focus on consumer discretionary, industrials and financials—sectors which are "enjoying positive momentum."
General Electric rose following news that the company will pay $23.4 million to settle charges that executives bribed Iraqi government officials to win contracts from 2000 to 2003, the Securities and Exchange Commission said. GE is the parent of CNBC.
Energy stocks were lower, including shares of BP , which slipped after the oil giant posted a $17 billion dollar second-quarter loss due to the costs of the Gulf oil spill and announced that Bob Dudley will succeed Tony Hayward. Hayward will be transferred to BP's operations in Russia.
Commodities fell across the board with oil prices falling nearly $1.50 to settle at $77.50 a barrel, reversing an earlier rally. And gold slipped more than 2 percent to settle at $1,158 an ounce, a three-month low.
US Steel posted its sixth quarterly loss and delivered a downbeat forecast, citing weak demand.
Apple shares were higher after the U.S. copyright office made a ruling that will allow iPhone users to add different software to their phones— including the right to change wireless-service providers.
Yahoo's part-owned Yahoo Japan unit is teaming up with Google to offer Google's search-engine technology, sidestepping Yahoo's extensive partnership with Microsoft.
The Treasury auctioned $38 billion in 2-year notes today, fetching a high yield of 0.665 percent. The bid-to-cover ratio was 3.33.
Auctions of 5-year and 7-year notes are expected on Wednesday and Thursday, respectively.
Volume was light, with about 1.1 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 17 to 13.
Tomorrow's earnings roster includes Boeing, ConocoPhillips, Corning and Visa.
Still to Come:
WEDNESDAY: Weekly mortgage apps; advance report on durable goods; 5-yr note auction; Beige Book; Earnings from: Boeing, Comcast, ConocoPhillips, Sprint and Visa
THURSDAY: Weekly jobless claims; 7-yr note auction; Microsoft analyst meeting; Earnings from: AstraZeneca, ExxonMobil, Royal Dutch Shell, Kellogg, Motorola and Amgen
FRIDAY: First release of 2Q GDP; employment cost index; Chicago PMI; consumer sentiment; Earnings from: Chevron and Merck
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