Stocks declined on Tuesday, with Wall Street slipping after a two-day rise, as markets considered the timing of any moves by the Federal Reserve to curb stimulus actions.
"The market was struggling to advance, after coming too far, too fast," said Mark Luschini, chief investment strategist at Janney Montgomery Scott, of the recent advance that has the S&P 500 up nearly 24 percent for the year and the Dow closing at a record high on Monday.
Richard Fisher, President of the Federal Reserve Bank of Dallas, told CNBC on Tuesday that the Fed's stimulus program could not continue forever.
"We've changed and impacted the markets because of our intervention and I understand there's sensitivity, but markets should also bear in mind that this program cannot go on forever," said Fisher.
"Maybe him repeating, or bringing the message forward for those who hadn't heard it" hit investor sentiment, said Luschini, referring to a report from Bloomberg News that had Atlanta Federal Reserve President Dennis Lockhart saying the central bank could tighten monetary policy in December.
"I think it's possible, I don't think it's plausible," said Luschini, who believes the Fed is more likely to start reducing its monthly asset purchases in March.
"I wouldn't mind seeing the market consolidate here and then be ready for some acceleration," said Tom Lee, JPMorgan's chief U.S. equity strategist. There could be a slight pullback by the end of the year, with the S&P possibly dipping back to 1,700, Lee added. "I think we could see something like that; it could be an entry point."
US Airways and American Airlines reached agreement with the U.S. Justice Department that has the airlines giving up airport slots to clear the way towards their merger.
Shares of News Corp. fell after the publisher of the Wall Street Journal late Monday reported less-than-expected revenue; Dish Network rose after the company posted quarterly results that beat estimates as it added far more pay-TV subscribers than anticipated.
The U.S. dollar edged higher against a basket of other global currencies including the yen, while borrowing costs reflected in the 10-year Treasury note rose, with the yield on the benchmark added 2 basis points to 2.77 percent.
On the New York Mercantile Exchange, crude-oil futures for December delivery fell $2.10, or 2.3 percent, to $93.04 a barrel, its lowest settlement since May 31; Gold futures for December delivery fell $9.90, or 0.8 percent, to $1,271.20 an ounce.
Both the Dow and the S&P 500 have hit record heights, the latter at the end of October, as the Federal Reserve held off on reducing its $85 billion in monthly asset purchases, also known as quantitative easing. And, better-than-expected corporate earnings and the most recent jobs report bolstered the view that the economy could be strong enough to handle Fed tightening.
The National Federation of Independent business reported small business optimism declined last month, as companies scaled back on hiring plans in the face of the partial government shutdown.
The small business survey, and the Chicago Fed National Activity Index, which "flat-lined" were likely not enough in and of themselves to push equities lower, said Luschini. "It's more of a pause, and maybe even the market is in the throes of a corrective process more than anything else," he added.
The CBOE Volatility Index (VIX), a gauge of investor uncertainty, climbed to within reach of 13, a low level by historical standards.In China, government officials ended a four-day gathering held to plan economic reforms, saying the would let markets take on a larger part in deciding where resources go.