U.S. equities closed mostly lower on Tuesday, but recorded monthly gains, as investors continued to evaluate the latest policies from the White House, while a slew of companies posted quarterly results.
The Nasdaq composite erased earlier losses, closing just above breakeven as the iShares Nasdaq Biotechnology ETF (IBB) gained around 2.8 percent after President Donald Trump met with several health care industry executives.
"The comments made [by Trump] about speeding up FDA approval I think are what are helping the biotechs," said Robert Pavlik, chief market strategist at Boston Private Wealth. "I think the broader market is still concerned about the immigration issue."
The Dow Jones industrial average fell about 100 points, with Goldman Sachs contributing the most losses.
"This is a market that is a bit disappointed because it hasn't heard much about what got investors excited in the first place," said Quincy Krosby, market strategist at Prudential Financial, referring to Trump's proposed tax cuts, government spending and deregulations.
The S&P 500 slipped 0.1 percent, with industrials leading decliners.
Major indexes in JanuarySource: FactSet
"This is a period of reconciling the expectations from the Trump administration's policies and the reality," said Bill Northey, chief investment officer at the Private Client Group at U.S. Bank, adding that some of the administration's measures and a "mixed" earnings season has "taken some of the wind out of the sails of this rally."
On Monday, investors and traders around the globe focused on an executive order — signed late Friday — that barred entry of certain nationals into the U.S. Stocks suffered their worst trading day of the year, with the Dow falling around 120 points, while the S&P dropped more than 0.6 percent. Equities in the U.S., however, have rallied considerably since Trump's election.
"Investors definitely need to be aware that the markets behaved very suddenly towards pricing in heavy premiums following the US election outcome based on fiscal promises, but so far it is the far-right agenda that we have seen the most movement on from the Trump administration," Jameel Ahmad, vice president of research at FXTM, said in a note.
"I do believe that investors need clarity on how the Trump administration will move forward with fiscal stimulus and infrastructure spending rather than blacklisting certain nationals and getting into a war of words with Mexico over the wall, otherwise there is a risk of the stock markets entering a correction," he said.
U.S. Treasurys gained ground, as the benchmark 10-year note yield fell to 2.44 percent and the short-term two-year note yield slipped to 1.2 percent. The U.S. dollar, one of the best-performing assets since the election, fell nearly 0.8 percent against a basket of currencies.
"The broader market action we've seen today and yesterday ... is a bit of a reversal from most of what we've seen since the election," said Eric Stein, co-director of global income at Eaton Vance. "As an objective market observer, you have to ask how much political capital is the Trump administration going to have left for tax reform."
Investors also had to contend with several quarterly reports from major companies. Under Armour shares tanked more than 20 percent after the firm missed Wall Street estimates on sales and profit.
Dow component Exxon Mobil's also reported quarterly results. The firm said its U.S. upstream business lost $2.3 billion in the fourth quarter of 2016, while its downstream segment made $1.2 billion. Firms scheduled to report after the close Tuesday include tech giant Apple, U.S. Steel and Anadarko Petroleum.
In economic news, U.S. labor costs rose less than expected in the fourth quarter, pointing to low inflation even as anecdotal evidence suggests that wage growth is picking up as the labor market tightens. The Employment Cost Index, the broadest measure of labor costs, increased 0.5 percent after rising 0.6 percent in the third quarter, the Labor Department said on Tuesday.
Meanwhile, the Chicago PMI adjusted January index reading came in at 50.3, below December's 53.9. Consumer confidence hit 111.8, below an estimate of 113.
Investors also kept an eye on the Federal Reserve as the U.S. central bank kicked off its first monetary policy meeting of the year. The Fed is scheduled to release its latest policy decision on Wednesday, with market participants largely expecting interest rates to remain unchanged.
However, Robert Tipp, chief investment strategist at PGIM Fixed Income, said the Fed "may want to crack open the window for a March rate hike. The market is not ready for that." "That's the one potential surprise for the market tomorrow."
The S&P 500 declined 2.03 points, or 0.09 percent, to close at 2,278.87, with industrials leading six sectors lower and utilities outperforming.
The Nasdaq composite rose 1.07 points, or 0.02 percent, to end at 5,614.79.
About nine stocks advanced for every five decliners at the New York Stock Exchange, with an exchange volume of 1.115 billion and a composite volume of 4.070 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.
— Reuters contributed to this report.
On tap this week:
Earnings: Facebook, Allstate, Ameriprise, Unum Group, Ameriprise, MetLife, Siemens, Anthem, Tupperware, Baxter, Johnson Controls,Symantec, IAC/Interactive, American Financial Group, Cabot, Legg Mason, Automatic Data, Baxter, Celanese, Dominion, Ingersoll-Rand,Marathon Petroleum, WEC Energy, Pitney Bowes, Owens-Illinois, Torchmark, Cirrus Logic, Altria
8:15 a.m. ADP payrolls
9:45 a.m. Manufacturing PMI
10:00 a.m. ISM manufacturing
10:00 a.m. Construction spending
2:00 p.m. Fed decision
Earnings:Merck & Co Inc Merck, Amazon.com, Amgen, Visa, Chipotle Mexican Grill, Estee Lauder, ConocoPhillips, Deutsche Bank, Philip Morris, Royal Dutch Shell, AutoLiv, Ball Corp, Cigna, NYTimes, AstraZeneca, Daimler, Novo Nordisk, Becton Dickinson, Boston Scientific, CME Group, Delphi Automotive, Marsh and McLennan, Ralph Lauren, Parker Hannifin, Sony, Sirius XM Radio, International Paper, A.O. Smith, Virtu Financial, Ryder System, Lazard, CMS Energy, Eaton, Estee Lauder, Kimco Realty, Motorola Solutions, athenahealth, Decker's Outdoor, DeVry Education, FireEye, GoPro
8:30 a.m. Jobless claims
8:30 a.m. Productivity
8:30 a.m. Unit labor costs
8:30 a.m. Nonfarm payrolls
9:15 a.m. Chicago Fed President Charles Evans
9:45 a.m. Services PMI
10:00 a.m. ISM non-mfg.
10:00 a.m. Factory orders