Stocks were little changed on Tuesday after U.S. markets began to drag later in New York trade as investors sought a catalyst to justify further gains after the latest stimulus plan.
The euro rose but was still about two cents from the 4-1/2-month peak posted against the U.S. dollar. Lingering concerns over Spain's funding problems and renewed worries about global growth weighed on markets.
Earlier Wall Street had been buoyed by end-of-quarter buying by funds and a higher-than-expected reading of confidence among American consumers.
But as the day wore on in New York and major U.S asset manager BlackRock said the strong equity rally this year has run its course, the gains were erased as analysts debated whether the drop was temporary or stocks had more room to run.
The MSCI world equity index was little changed at 336.288. European shares gained 0.4 percent.
"Any downdraft is going to be abbreviated with the recognition of the fact the Fed has effectively put a floor in the market, and it's not just the Fed, it's the ECB as well," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. "What we are kind of dealing with here is a rudderless ship - there is no economic data to support any sort of robust buy activity."
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The Dow Jones industrial average was down 26.50 points, or 0.20 percent, at 13,532.42. The Standard & Poor's 500 Index was down 3.03 points, or 0.21 percent, at 1,453.86. The Nasdaq Composite Index was down 7.46 points, or 0.24 percent, at 3,153.32.
U.S. stocks rose at the open after comments late on Monday from the president of the San Francisco Fed suggested the central bank was not done taking action to stimulate the economy. That overshadowed a pessimistic outlook from Caterpillar.
U.S. stocks were also supported early by a private sector report showing U.S. consumer confidence jumped to its highest level in seven months in September as Americans were more optimistic about the job market and income prospects.
"There are some incrementally positive consumer numbers and housing data," said Dan Veru, chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, which oversees $3.6 billion. "It's in the face of a weaker forecast from Caterpillar but difficult to get too upset about stuff they are talking about for 2015."
Caterpillar shares fell 2.8 percent in New York trade. On Monday, Caterpillar Inc cut its 2015 profit outlook, warning that weaker commodity prices would result in a bigger-than-expected decline in demand.
EURO HIGHER
U.S. data showed single-family home prices rose for a sixth month in a row in July, though the improvement was not as strong as expected and had minimal impact on trading.
The euro rose 0.2 percent at $1.2947.
The euro extended gains against the greenback after the U.S. consumer confidence data. The overall support for the single currency rally in recent weeks was the European Central Bank's offer to provide bailout funds to indebted governments - if they seek its help and are willing to accept tough conditions.
But investors were not making huge bets.
"Fears about Europe's situation remain among investors, with the focus mostly on Spain, but Greece is also still a concern," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
At the center of market concerns is what happens next in Spain, where the government is due this week to present its draft budget for 2013, outline new structural reforms for the economy and release the results of stress tests on the banking sector.
There are also concerns about Greece, which is due to hear soon from the "troika" of international lenders - the IMF, ECB and European Commission - on the prospects of further loans to finance government outlays.
U.S. Treasury debt prices were mixed.
The benchmark 10-year U.S. Treasury note was up 3/32, with the yield at 1.7025 percent. The 2-year U.S. Treasury note was down 1/32, with the yield at 0.2703 percent.
GROWTH CONCERNS
After the recent central bank actions, many investors have become convinced that markets can rally further. But they believe any gains are highly dependent on signs the slowdown in the global economy has bottomed.
"The majority of central banks are in total, outspoken reflationary mode. That's a big story," said Didier Duret, chief investment officer at ABN Amro Private Banking in London.
"They are intervening actively for a very clear reasons: to support the economy in the U.S., to support the funding in Europe and to support also the economies in emerging markets."
Duret said the main trigger for the next move up will likely be signs of a strengthening U.S. recovery.