Stocks finished in negative territory Tuesday amid worries over China's economic outlook and as investors took a breather following the recent market rally.
The Dow Jones Industrial Average fell 68.94 points, or 0.52 percent, to close at 13,170.19, led by Caterpillar and Alcoa, but still recovered from its 110-point decline near the start of the session.
Meanwhile, Bank of America rallied after the bank said it had no intention of introducing additional equity in a secondary offering, contrary to rumors.
The S&P 500 slid 4.23 points, or 0.30 percent, to finish at 1,405.52, but still ended above the 1,400 milestone. The Nasdaq erased 4.17 points, or 0.14 percent, to end at 3,074.15.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed above 15.
Among the key S&P sectors, industrials and energy led the laggards, while financials edged higher.
BHP Billiton tumbled after the CEO of the world's largest miner said the company was seeing signs of "flattening" iron ore demand from China, raising concerns over the nation's economic outlook, though temporarily it was pushing ahead with plans to expand production. Rival Rio Tinto also declined. (Read More: BHP Comments 'Misinterpreted' )
“[China] already came out a few weeks ago and lowered their official growth rate,” noted John Fox, director of research at Fenimore Asset Management, adding that BHP Billiton CEO’s comments shouldn’t have been a surprise to the markets.
In addition, China announced it was increasing gasoline and diesel prices by 6 to 7 percent, the biggest increase in nearly three years, likely putting further burden on consumers.
Meanwhile, oil prices settled below $106 a barrelafter Saudi Arabia promised to meet any shortfalls in global oil supplies.
Despite steep losses in major materials and industrials, companies such as Yum Brands , which have big exposure to China still ended higher.
“The overall economic trend is definitely getting better,” said Fox. “Market has been very strong this year and there are only a few assets or sectors that are down so people are waiting to get on but are still nervous.”
Still, Fox said he expects housing and jobs numbers to improve throughout the year, which will continue to drive the market rally. He advised investors to look into economically cyclical sectors such as financials, industrials, techs and materials.
Apple closed at another all-time high, despite controversy over the new iPad overheatingwhile running games. Consumer Reports told CNBC that the temperature does not pose a serious problem and shouldn't warrant a recall.
H-P slid after a report that the tech giant announced a reorganization that will combine its imaging and printing divisions under its PC-making personal systems group.
Amazon.com jumped after Wall Street cheered the online retailer's acquisition of Kiva Systems, a developer of robots used to operate shipping centers, for $775 million in cash.
Yahoo gained following reports that the search-engine company has resumed deal talks with China's Alibaba.
Financials were one of the session's best performing sectors. Jefferies rallied after the firm reported stronger fixed-income trading and underwriting revenue. The news helped boost other banks including Goldman Sachs and Morgan Stanley . (More From CNBC: Why the Jefferies Indicator is Slightly Bogus )
Disney edged lower after the conglomerate said its latest movie "John Carter" is expected to lose about $200 million , leading the studio unit to post an operating loss of $80 million to $120 million for the quarter.
Meanwhile, Lions Gate Entertainment hit an all-time high ahead of the release of its highly anticipated movie, "The Hunger Games."
Among earnings, Tiffany & Co rallied to lead the S&P 500 gainers after the upscale jewelry retailer forecast higher sales for 2012, thanks to further expansion in Asia and the Americas.
And Michael Kors rose after the retailer posted strong sales and raised its earnings outlook.
Adobe Systems tumbled after the software company said revenue growth slowed as sales of its Creative Suite software declined. Meanwhile, Jefferies raised its price target on the firm to $38 from $34.
Oracle is slated to post earnings after-the-bell tonight.
On the economic front, housing starts declined 1.1 percentin February to a seasonally adjusted annual rate of 698,000 units, but building permits jumped to their highest level in more than 3 years, according to the Commerce Department.
—Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC —
Coming Up This Week:
WEDNESDAY: Weekly mortgage apps, existing home sale, oil inventories, HP annual mtg, Starbucks annual mtg; Earnings from General Mills, Discover FinancialTHURSDAY: Jobless claims, FHFA home price index, leading indicators, Green Mountain Coffee shareholders mtg; Earnings from FedEx, Dollar General, Gamestop, Lululemon, Nike, AccentureFRIDAY: New home sales, Fed's Lockhart speaks, Fed's Bullard speaks; Earnings from Darden Restaurants
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