IE 11 is not supported. For an optimal experience visit our site on another browser.

Stocks Pare Losses, but Techs Drag; Apple Down 2%

Stocks came off their worst levels Tuesday, but gains were limited as investors worried over the ongoing debate in Washington over raising the debt ceiling and ahead of what is expected to be a lackluster earnings season.

Apple tumbled more than 2 percent to trade below $500 a share. Earlier, Nomura Securities lowered its price target on the iPhone maker to $530 from $660 to "reflect signs of weaker-than-expected iPhone 5 sales." 

(Read More: Can Apple Come Back After Falling?)

In the last few months, analysts have been raising red flags over sales of the iPhone 5, which debuted in September, citing lowered expectations and increasing competition from the likes of Samsung. Apple shares hit an all-time high of $705 a share following the iPhone 5 release and have shed roughly a quarter of their value since. 

The Dow Jones Industrial Average struggled to turn higher, after squeezing out a gain in the previous session. Hewlett-Packard led the blue-chip laggards, while Caterpillar gained. 

The S&P 500 and the Nasdaq also shaved their losses. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, gained near 14.

After the closing bell on Monday, Federal Reserve Chairman Ben Bernanke urged Congress to raise the debt ceiling—the $16.4 trillion borrowing limit—while Treasury Secretary Timothy Geithner warned the ceiling could be reached by mid-February or early March.

 (Read More: Bernanke: 'We're Not Out of the Woods' Despite 'Fiscal Cliff' Deal)

Ratings agency Fitch warned policymakers that failure to raise the debt ceiling within a "timely" manner would see the nation's sovereign ratings put under formal review with "highly uncertain" consequences.

Gains in Europe and Asian trade on Tuesday were also capped by concerns about the U.S. debt ceiling. 

Among earnings, Lennar posted earnings that topped expectations and the homebuilder reported a seventh-straight jump in new home orders. 

Earnings will kick off in earnest on Wednesday, with reports due from Goldman Sachs, JPMorgan and eBay. (Read More: Bank Earnings: What to Watch For

"Traders will most likely continue to positioning themselves for tomorrow when the earning season will most likely take center stage," said Ishaq Siddiqi, market strategist at ETX Capital, in a note.

Dell extended gains a day after sources said the computer hardware company is in talks with private equity firms on a potential buyout. Meanwhile, Jefferies and Deutsche Bank both lifted their price target on the company.

 (Read More: Dell Buyout Has '50-50' Chance: Billionaire Ross)

Facebook dipped ahead of its news event at its headquarters at 1pm ET. Boosted by a series of upbeat analyst reports, the social-networking giant's stock has rallied nearly 9 percent since the invitation was released early last week.

On the economic front, retail sales rose 0.5 percent in December, thanks to a boost in autos, as consumers largely overlooked the threat of higher taxes, according to the Commerce Department. Economists expected sales to edge up 0.2 percent, according to a Reuters poll. Combined, sales climbed 5.2 percent in 2012. 

Meanwhile, producer prices declined 0.2 percent in December, slipping for the third-straight month, according to the Labor Department. Economists polled by Reuters had expected a drop of 0.1 percent. 

And manufacturing in New York state fell to -7.8, contracting for a sixth-consecutive month in January, according to the New York Federal Reserve. Economists had expected a flat reading, according to a survey by Reuters. 

U.S. business inventories rose 0.3 percent in November to a record $1.62 trillion, according to the Commerce Department, in line with expectations. 

"The impact of the economic data on the financial markets might be rather short lived as the political wrangling over the raising of the debt ceiling is starting to heat up in Washington spreading increasingly uncertainty which could limit any advances to the upside," said Siddiqi. 

By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

TUESDAY: Business inventories, Fed's Plosser speaks, credit card default rates reported, Facebook event
WEDNESDAY: Weekly mortgage applications, CPI, Treasury int'l capital, industrial production, housing market index, Fed's Kocherlakota speaks, oil inventories, Beige Book, Fed's Fisher speaks, OPEC's monthly market report; Earnings from Goldman Sachs, JPMorgan, Bank of NY Mellon, Ebay
THURSDAY: Housing starts, jobless claims, Philadelphia Fed survey, natural gas inventories, Fed's Lockhart speaks, Fed balance sheet, money supply; Earnings from Bank of America, Citigroup, UnitedHealth, BB&T, BlackRock, American Express, Intel, Capital One
FRIDAY: General Electric, Schlumberger, Morgan Stanley