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Stocks close lower as Street weighs dollar, oil; Dow off 100 points

U.S. stocks closed lower on Tuesday as investors attempted to find clarity on the timing of an interest rate hike amid concerns of the dollar's impact on earnings.

""My quick take would be it looked like some kind of asset allocation today where people were selling stocks and buying bonds," said Michael O'Rourke, chief market strategist at JonesTrading. "We have to come back to the currency trade. The dollar is trying to find it's bottom here after the Fed meeting—that would be a headwind for equities. I also think the earnings picture is not that great."

The Dow Jones industrial average closed down 105 points, passing the triple-digit line in the last few minutes before the close.

"I think you've got a number of cross currents right now in the market," said Quincy Krosby, market strategist at Prudential Financial. "The tug of war on oil is almost equivalent to the tug of war on interest rates."

Crude oil settled up 6 cents at $47.51 a barrel. The U.S. dollar edged slightly higher against major world currencies. The U.S. 10-year Treasury yield traded near 1.88 percent.

"The clear path we had before the Fed meeting has been interrupted," Krosby said, referring to the strong dollar, weaker euro story from last week. She also noted some profit-taking in the few days before companies begin reporting first quarter results in April.

"People are beginning to digest issues corporations are having with the volatility of the dollar," said Peter Boockvar, chief market analyst at The Lindsey Group, noting that the first quarter is expected to show the first negative earnings comparisons since 2009.

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Last Wednesday, the dovish Fed statement indicated a rate hike would come later, and at a more gradual pace.

"I think whenever you're dealing with interest rate increases from the Federal Reserve, the market goes into a period of good news (is) bad news," said Timothy Courtney, chief investment officer at Exencial Wealth Advisors. "Really, that's a short-term phenomenon. We're going to be moving out of that. Most of the data today ... was pretty good."

Stocks initially shook off losses on news that February new home sales rose 7.8 percent to 539,000, the highest level in seven years, the U.S. Department of Commerce said.

"You need to have news significantly better to change our mind about monetary policy," said Art Hogan, chief market strategist at Wunderlich Securities. He noted that new home sales make up a much smaller percentage of the housing market than existing home sales, which indicated continued shortage of properties.

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A slower housing market would further dampen the Fed's outlook on U.S. economic growth and likely push an interest rate hike further out.

"Really not much is happening today. We had incrementally positive economic news today," said Jack Ablin, chief investment officer at BMO Private Bank. "Any impending Fed action is months away. We're preparing for first-quarter earnings reports...which are expected to be negative."

Investors continue to eye the dollar, which traded mostly flat after surging in the last few weeks.

Stocks have tended to trade higher on a weaker dollar, and decline on a stronger dollar. Many multinational firms pointed to FX headwinds as weighing on their fourth-quarter earnings.

"If the dollar stays at these (lower) levels, then the indexes could hit record highs," Peter Cardillo, chief market economist at Rockwell Global Capital, adding he believes the S&P 500 could hit 2,125 and the Nasdaq 5,075.

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The euro traded higher against the dollar, near $1.09, following better-than-expected business surveys. Business activity in the euro zone hit a 46-month high in March, according to data released on Tuesday, bolstering hopes that growth in the region is becoming more entrenched.

The positive data boosted European equities to close higher on Tuesday.

Investors also kept an eye on the ongoing negotiations between Greece and the euro zone, as a new report emerged saying Greece will run out of money by April 20 unless it receives fresh aid from creditors.

"I know we've seen it 10 times, but they're cutting it close," Hogan said. "Other than that we have stability in all market classes... which feels weird."

"We sort of go through a vacuum of information before earnings season," he said. "Stabilization is with us until we get some kind of catalyst. That's ok because we're 1 percent off all-time highs. ... It feels like this market wants to consolidate sideways and that's healthy as well."

In domestic news, U.S. Consumer Price Index rose 0.2 percent in February, in line with analysts' expectations, the Labor Department said Tuesday morning. The gain came after dropping 0.7 percent the previous month.

Read More US in sweet spot, time for Fed to act: Fisher

The so-called core CPI, which strips out food and energy costs, increased 0.2 percent in February after a similar gain in January. In the 12 months through February, the core CPI rose 1.7 percent, the largest increase since November.

"In general this economic data is positive, providing some upward support," said Eric Lascelles, chief economist for RBC Global Asset Management.

U.S. stocks struggled for direction and briefly traded higher on the strong housing numbers.

"Technical influences have influenced price action. At the moment we're modestly overbought," said Terry Sandven, chief equity strategist at US Bank Wealth Management. "It's plausible to expect the index to pull back… down 2 to 4 percent on average. (They're) range bound, trading sideways until the first quarter."

The Dow Jones Industrial Average closed down 104.90 points, or 0.58 percent, at 18,011.14, with Chevron the greatest laggard and McDonald's the greatest of six advancers.

The S&P 500 closed down 12.92 points, or 0.61 percent, at 2,091.50, as utilities led all 10 sectors lower.

The Nasdaq closed down 16.25 points, or 0.32 percent, at 4,994.73.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded just above 13.

Decliners were a step ahead of advancers on the New York Stock Exchange, with an exchange volume of about 750 million and a composite volume of nearly 3.2 billion in the close.

Gold settled up $3.70 to $1,191.40 an ounce.

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In corporate news:

Ruth Porat, CFO and executive vice president at Morgan Stanley, announced she is leaving the firm for Google.

Facebook is in talks with media companies as it wants news content to become native feed posts so users stay within the social network, according to The New York Times.

Abiomed's miniature blood pump system that maintains heart function and circulation received approval from the U.S. Food and Drug Administration.

Ross Stores announced a two-for-one stock split, to be paid in the form of a 100 percent stock divided on June 11 to holders as of April 22.

General Motors is investing $350 million to build its next-generation Chevrolet Cruze compact in Mexico, which is part of a previously announced $5 billion investment plan in the region.

Billionaire Carl Icahn increased his stake in Chesapeake Energy to 73 million shares after the close on Monday, an increase from 66 million shares in December. The oil and gas company lowered its 2015 capital expenditures by $500 million on low commodity prices.

As of Monday's close:

  • The Dow Jones industrial average was within 1.5 standard deviations above its 50-day moving average. Since 1981 the index has been in this position 8.37 percent of all trading days, according to quantitative analytics tool Kensho. The probability of the index moving lower is 60.6 percent and the probability of it moving higher in the days following is 39.4 percent.
  • The S&P 500 was within 1.5 standard deviations above its 50-day moving average. Since 1980 the index has been in this position 8.33 percent of all trading days, according to Kensho. The probability of the index moving higher in the days following is 45.1 percent and the probability of it moving lower is 54.9 percent.
  • The Nasdaq composite was within 1.5 standard deviations above its 50-day moving average. Since 1980 the index has been in this position 8.27 percent of all trading days, according to Kensho. The probability of the index moving lower is 65.1 percent and the probability of it moving higher is 34.9 percent.

CNBC.com and Reuters contributed to this report.

Disclosure: CNBC's parent NBCUniversal is a minority investor in Kensho.

On tap this week:

Tuesday

10:00 pm: San Francisco Fed President John Williams in Australia

Wednesday

Earnings: Paychex, Apollo Education Group, Yingli Green Energy, Red Hat, Five Below, Worthington Industries

6:30 am: Chicago Fed President Charles Evans in London

8:30 am: Durable goods

11:30 am: $13 billion two-year floating-rate notes

1:00 pm: $35 billion five-year note auction

Thursday

Earnings: ConAgra, Accenture, Lululemon Athletica, Gamestop,Restoration Hardware, Scholastic, Commercial Metals

8:30 am: Initial claims

9:45 am: Services PMI

1:00 pm: $29 billion seven-year note auction

Friday

Earnings: BlackBerry

6:30 am: Fed Vice Chairman Fischer speaks in Germany

8:30 am: Real GDP (Q4 third)

10:00 am: Consumer sentiment

10:00 am: Atlanta Fed President Dennis Lockhart in Detroit

3:45 pm: Fed Chair Janet Yellen on monetary policy in San Francisco, Q&A

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