U.S. stocks pulled back from recent highs to close lower in light volume trade on Tuesday, as investors weighed soft auto sales and looked ahead to domestic data.
"There's no economic reports other than auto and truck sales so I don't think there's anything going on except that the market is rolling over," said Robert Pavlik, chief market strategist at Boston Private Wealth. "I don't think today's market (was) the start of any sort of consolidation."
Wednesday brings a relatively heavy day of economic reports, with weekly mortgage applications at 7:00 a.m., the private sector payrolls report at 8:15 a.m., service sector reports later in the morning and the Fed's Beige Book at 2:00 p.m.
"We're also positioning ourselves... in case the Beige Book may not be market friendly," said Peter Cardillo, chief market economist at Rockwell Global Capital. He expects a moderate report.
Stocks failed to hold Monday's record closes, which had the Nasdaq above 5,000 for the first time since March 2000 and the S&P 500 and Dow at new highs.
The Nasdaq closed down 28.2 points, or 0.56 percent, at 4,979.90.
The Dow Jones Industrial Average briefly fell more than 150 points in early afternoon trade on Tuesday before recovering to close down 85.2 points, or 0.47 percent, at 18,203.37, with Cisco the greatest decliner and Boeing the greatest of six blue chip advancers.
Kim Forrest, senior equity analyst at Fort Pitt Capital, said the market had initially overreacted to soft auto sales and that stocks recovered from intraday lows because of "more buyers coming into the market."
The closed down 9.61 points, or 0.45 percent, at 2,107.78, with health care the greatest laggard and utilities and energy the only sectors advancing.
Earlier, the index dipped below 2,100, below Monday's intraday low of 2,104, "which is not a good sign," said Art Cashin, director of floor operations for UBS. "A bad sign (but hopefully not likely today) would be a break below 2,090."
David Lutz, head of ETF trading at Jones Trading, said the market traded lower in a "risk off" kind of day, where traders are looking at a number of factors including softer-than-expected auto sales and the pending European Central Bank meeting Thursday.
He said the Street was fixated on Israeli Prime Minister Benjamin about an Iran nuclear deal before Congress late Tuesday morning.
"I just think it's a sentiment thing. I think it's just a reason people are pointing at. I don't think it's a driver of the tape," Lutz said. He said he was watching the airline stocks, under pressure from oil gains, and the fact that the market was trading on very light volume.
Peter Boockvar, chief market analyst at The Lindsey Group, attributed the decline to weakness in European bank stocks and Fiat misses on car sales. European stocks closed lower on Tuesday on disappointing economic data.
"Weather played a role in the weakness. That might shift sales out later into the spring," said Dan Veru, chief investment officer at Palisade Capital Management.
"I don't think anything has changed that keeps money flowing out of stocks but you have money moving around (to different sectors)," he said.
Major news later this week include details on the European Central Bank's quantitative easing program and the monthly jobs report on Friday.
In corporate news, Best Buy earned an adjusted $1.48 per share for its latest quarter, beating estimates by 13 cents, though revenue was slightly below forecasts. Best Buy also declared a special dividend of 51 cents per share, and increased its regular quarterly dividend by 21 percent to 23 cents per share.
Dick's Sporting Goods earned an adjusted $1.30 per share for its latest quarter, 8 cents above estimates, with revenue also above forecasts. Dick's said it expected to earn $3.10 to $3.20 per share for 2015, compared to analyst estimates Of $3.19.
AutoZone reported quarterly profit of $6.51 per share, 13 cents above estimates, with revenue also above consensus. Domestic same-store sales were up 3.6 percent from a year earlier.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 7 percent to trade just under 14.
Three stocks declined for every two advancers on the New York Stock Exchange with an exchange volume of 737 million and a composite volume of 3.2 billion, below the average volume for the year of 3.69 billion.
Crude oil futures settled up 93 cents, or 1.88 percent, at $50.52 a barrel on the New York Mercantile Exchange. Gold futures settled down $3.80, $1,204.40 an ounce.
The U.S. 10-year yield traded near 2.12 percent. The U.S. dollar reversed to edge higher against major world currencies.
—Reuters and CNBC.com contributed to this report.
On tap this week:
Earnings: Brown-Forman, Abercrombie & Fitch, H&R Block, PetSmart
7 a.m.: Mortgage Applications
8:15 a.m.: ADP Employment Report
9:45 a.m.: PMI Services Index
10 a.m.: ISM Non-manufacturing Index
10:30 a.m.: Oil inventories
2 p.m.: Beige Book
Chain store sales
ECB Governing Council Press Conference
Earnings: Costco, Canadian Natural Resources, Kroger, JoyGlobal, Cooper Cos., Diamond Foods, Finisar, Quiksilver
7:30 a.m.: Challenger Job-Cut Report
8:30 a.m.: Jobless claims
8:30 a.m.: Productivity & Costs
10 a.m.: Factory orders
10:30 a.m.: Natural gas inventories
4:30 p.m.: Fed balance sheet/Money supply
Weekly rig count
Earnings: Foot Locker, Staples
8:30 a.m.: Nonfarm payrolls
8:30 a.m.: International trade
3 p.m.: Consumer credit
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