Stocks ended modestly lower amid further signs of economic weakness, and despite a positive call on commodities by Goldman Sachs, which lifted prices of oil and metals.
The Dow Jones Industrial Average fell 25.05 points, or 0.2 percent to close at 12,356.21 after fluctuating throughout the session. The blue chip average started the week out shaky, falling about 130 points after a weekend downgrade of Italy's outlook and concerns over Greek debt restructuring.
The Goldman report pushed up energy stocks include Dow components Chevron and Exxon Mobil .
TheS&P 500 fell 1.09 points, or 0.08 percent, to close at 1,316.28, while the Nasdaq fell 12.74 points, or 0.5 percent to close at 2,746.16. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to below 18.
Among key S&P sectors, financials and industrials slipped, while energy gained.
"There is currently a tug of war going on in the market, with some investors worried about a continued slowdown in the economy during the second half of 2011," said Michael Sheldon, chief market strategist at RDM Financial Group. "On the other hand, other investors continue to stick to their guns and invest based on continued growth in the global economy in the quarters ahead."
Those worried about a slowdown probably focused Tuesday on a report by the Richmond Federal Reserveshowing a decline in manufacturing activity in May. The Richmond Fed index fell to a negative 6 after a reading of 10 in April, as shipments and new orders declined.
"When you combine this report with the Philadelphia Fed and New York Fed manufacturing reports, the odds are stacking up that we’re going to see some softening in the national ISM report that comes out on June 1," Sheldon said.
The market is also struggling with what will happen when the Federal Reserve stops purchasing long-term bonds, a program known as quantitative easing, at the end of June, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
"The markets are backing off in part because they are concerned whether assets will move higher in the absence of Fed buying," McCain said. "If equity prices correct enough, we may find that once we get past June we see a renewed enthusiasm over the next month or so."
Investors also have an eye on debt troubles in peripheral euro zone countries. All these factors combine are leading some analysts to expect stocks to continue tumbling.
"If you think of the marriage of European events and the end of the Fed (easing) and summer illiquidity, you have the perfect setup for a correction," said Jordan Kotick, global head of technical strategy at Barclays Capital.