Also putting a damper on stocks, China posted weaker-than-expected trade data and poor industrial outputgrowth in August, fanning new worries over the global economic outlook.
Last week, Chinese regulators approved $157 billion worth of infrastructure projects, but economists warned that without further policy stimulus, Asian powerhouse nation may miss its 7.5-percent growth targetfor 2012.
Meanwhile, some strategists called for near-term pullbacks following the multi-year highs.
"While we are bullish on equities for the long term...upside for the remainder of the year may be limited," wrote Savita Subramanian, head of U.S. equity and quantitative strategy at BofA Merrill Lynch. "In our view, the next few months hold several macro risks for equity investors, including potential for negative economic surprises as uncertainty around the fiscal cliff dampens economic activity, ongoing tensions in the Middle East, potential for more downward estimate revisions, and continued uncertainty around Europe/EM."
AIG declined after the Treasury Department said it will sell most of its stake in the insurer, making the government a minority investor for the first time since it bailed out the company nearly four years ago.
BP said it will sell some of its deep-water Gulf of Mexico oil and gas properties to Plains Exploration & Production in a deal worth $5.6 billion. Raymond James raised its price target on BP to $44 from $42.
Meanwhile, Transocean said it is selling 38 of its shallow-water rigs to Shelf Drilling International for about $855 million.
Among techs, Intel fell for a second day to lead the Dow laggards after the company lowered its third-quarter revenue forecastlast week due to softer-than-expected demand for its chips. At least three brokerages cut their price targets on the firm.
Hewlett-Packard gained after the hardware and software maker said it will slash 29,000 jobs by October 2014, more than the 27,000 cuts it previously announced.
Apple pulled back after earlier hitting an all-time high of $683.29 a share ahead of its event on Wednesday where the tech giant is expected to unveil the iPhone 5.
On the economic front, consumer credit shrank by $3.28 billion in July, falling unexpectedly for the first time in almost a year, according to the Federal Reserve. Economists had expected an advance of $9.1 billion.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: NFIB small business optimism index, McDonald's August sales, international trade, 3-yr note auction, Intel developers forum
WEDNESDAY: Weekly mortgage apps, import & export prices, wholesale trade, oil inventories, 10-yr note auction, crop outlook report, Apple iPhone 5 event, FOMC meeting begins
THURSDAY: Jobless claims, PPI, 30-yr bond auction, FOMC mtg announcement, FOMC forecasts, Bernanke press conference; Earnings from Pier 1 Imports
FRIDAY: CPI, retail sales, industrial production, consumer sentiment, business inventories, FDA decision on Truvia
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