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US stocks edged lower on Tuesday, erasing earlier gains as the S&P 500 met resistance around its 50-day moving average, a level the index has not been able to close above for the past two weeks.
Among the S&P 500's 10 sectors, the energy sector index rose 0.2% after crude oil prices hit a nine-month high as turmoil in the Middle East unsettled investors.
The S&P's industrial sector index fell 1.1% and ranked as the biggest decliner.
The major US stock indexes traded higher until early afternoon, boosted by positive car sales and factory orders. The S&P 500 rose as high as 1,624.26 early in the session.
"We have been seeing this pattern where the market starts off with strength in the morning session, but drifts a little lower with some selling in the afternoon session," said Ryan Detrick, an analyst at Schaeffer's Investment Research, in Cincinnati.
He added that with no major news and US markets closing early on Wednesday and all of Thursday for Independence Day, traders were adjusting their positions before the all-important non-farm payrolls report on Friday. Economists have forecast an increase of 165,000 jobs.
"We saw the market moving to the downside right around that 50-day moving average. It's a bit technical here, but on a day like today, it's an area that people are looking at closely and so far, it's been serving as a bit of resistance."
The 50-day moving average for the S&P 500 was 1,623.94. The benchmark index has not been able to close above its 50-day moving average since closing below that closely watched technical level on June 20.
The Dow Jones industrial average fell 42.55 points, or 0.28%, to end at 14,932.41. The Standard & Poor's 500 Index dipped just 0.88 of a point, or 0.05%, to finish at 1,614.08. The Nasdaq Composite Index slipped 1.09 points, or 0.03%, to close at 3,433.40.
The CBOE Volatility Index , Wall Street's favorate barometer of investor anxiety, rose 0.4% to 16.44.
Volatility has remained elevated from two weeks ago after the Fed said it expected to reduce its $85 billion a month of bond buying, which has helped drive the US stock market's rally this year. Since those comments, several Fed officials have said the central bank would not prematurely end its monetary stimulus program. Those reassuring remarks helped stabilize the market.
In Tuesday's session, shares of automaker Ford Motor Co hit a 52-week high of $16.21 after the company and rival General Motors reported strong sales last month. Ford said the overall US auto industry will report its best monthly sales rate since December 2007. Ford's stock shot up 2.8% to close at $16.18 while GM's shares rose 0.3% to end at $34.10.
The S&P 500 is 3.3% below its May 21 record closing high of 1,669.16. Small caps have closed within a hair's breadth of all-time highs reached in May. The S&P Small-Cap 600 is about 0.8% below its all-time closing high, and the Russell 2000 is 1.1% below its best close.
The recent outperformance by stocks with smaller market capitalizations and higher volatility point to a belief that the recent rise in interest rates is constructive, despite the S&P 500 edging lower, according to a Monday note from Goldman Sachs strategists.
"The negative performance at the index level has been driven more by positioning and policy uncertainty than a deteriorating view on economic growth," they wrote.
William Dudley, president of the Federal Reserve Bank of New York, on Tuesday repeated comments made last week, saying the central bank is likely to support the economic recovery for some time.
Shares of alcoholic beverage company Constellation Brands Inc fell 3.6% to $51.25 after its first-quarter earnings and revenue missed expectations.
Sources said Pfizer Inc and Novartis AG may make preliminary bids for Onyx Pharmaceuticals Inc . On Sunday, Onyx turned down a roughly $10 billion offer from Amgen Inc . Onyx shares rose 3.2% to close at $135.58 after hitting a 52-week high of $135.69. The stock gained more than 50% in Monday's session.
About 6.1 billion shares exchanged hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of about 6.4 billion.
Decliners outnumbered advancers on the New York Stock Exchange by a ratio of 3 to 2. On the Nasdaq, nearly 13 stocks fell for every 12 that rose.
