Stocks gained some strength in the final hour of trading, but remained mixed after news the Federal Reserve didn't believe the economy had improved enough by December to alter its economic stimulus program.
The Dow Jones Industrial Average turned positive, rising more than 15 points, after the Federal Reserve's December policy-setting minutes were released.
Tuesday's lackluster session follows a day after upbeat news on manufacturing across the world encouraged investors to get the new year off to a strong start. All the major indexes closed Monday at multi-year highs.
Alcoa and Disney led blue-chips higher, while McDonald's and Coca Cola declined.
The S&P 500 and the Nasdaq remained down, but off the lows of the session. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18.
Among key S&P sectors, energy, materials and consumer discretionary fell,while telecom rose.
At the Dec. 14 Federal Open Market Committee meeting, central bank officials believed the economic recovery hadn't gained enough strength to warrant a change in the Fed's $600 billion bond-buying program.
If the Fed didn't have enough evidence of a turnaround in the economy to change its stimulus program in December, they probably won't see enough evidence in coming months, Todd Schoenberger, managing director at LandColt Trading told CNBC.com.
That's because, while the economy is improving, headwinds remain, including rising gas prices, still anemic job growth, Schoenberger said.
"The Fed is not going to have evidence that’s going to help them to trim back on that $600B," he said. "That’s good news for stocks—the market wants QE2," he added, referring to the second round of quantitative easing, the name given to the Fed's gradual purchases of long-term bonds.
A deal between Qualcomm and Atheros Communications , a semiconductor manufacturer, could be announced later this week for $45 a share, or $3.5 billion, according to the New York Times, citing "two people with direct knowledge of the talks."
Ford traded mostly flat even after the automaker reported its U.S. sales for December rose 6.7 percent from a year earlier, and 30 percent more than November levels.
General Motors gained after the automaker reported sales rose 7.5 percent from the same month last year, its best showing for last year. GM began trading on the New York Stock Exchange in mid-November. Meanwhile, RBC started coverage on GM with an "outperform" rating and a $42 price target.
Chrysler's sales, meanwhile, rose 16.4 percent in December from the same time in 2009, while the automaker's sales rose 17 percent for the year.
Toyota's sales, however, fell 5.5 percent in December from the same month a year ago. But Nissan's sales rose 28 percent in December from a year earlier.
Overall, December auto sales were expected to reach 12.3 million, according to economists surveyed by Reuters.