NEW YORK U.S. stocks fell on Tuesday as investors sought a catalyst to justify further gains and the euro was under pressure on concerns about a bailout for debt-laden Spain.
The euro was about two cents from the 4-1/2-month peak posted against the U.S. dollar. Renewed worries about global growth also 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 and stocks declined.
The Dow Jones industrial average .DJI was down 52.02 points, or 0.38 percent, at 13,506.90. The Standard & Poor's 500 Index .SPX was down 8.53 points, or 0.59 percent, at 1,448.36. The Nasdaq Composite Index .IXIC was down 26.55 points, or 0.84 percent, at 3,134.23.
The MSCI world equity index .MIWD00000PUS was little changed at 336.288. European shares .FTEU3 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."
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 (CAT.N)..N
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.
"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 it's difficult to get too upset about stuff they are talking about for 2015."
Caterpillar shares (CAT.N) fell 3 percent. On Monday, Caterpillar Inc cut its 2015 profit outlook, warning that weaker commodity prices would result in a bigger-than-expected decline in demand.
NO HUGE BETS
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.
The euro was also little changed at $1.2925.
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. 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.
U.S. Treasury debt prices were mixed.
The benchmark 10-year U.S. Treasury note was up 7/32, with the yield at 1.6887 percent. The 2-year U.S. Treasury note was down 1/32, with the yield at 0.2703 percent.
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.
(Reporting by Nick Olivari; Additional reporting by Chuck Mikolajczak, Ryan Vlastelica, Richard Leong and Julie Haviv in New York and Richard Hubbard in London; Editing by Kenneth Barry)