Valero Energy, a refinery operator, was the biggest gainer in the S&P 500. The company's stock climbed $4.96, or 13 percent, to $43.77 after the company said that fourth-quarter profit soared on higher refining margins, as it swapped out foreign crude for cheaper domestic oil.
Investor optimism was checked by a report that showed U.S. consumer confidence sank in January to the lowest level in more than a year as Americans fretted about the economic outlook and higher Social Security taxes. The Conference Board said that its consumer confidence index dropped to 58.6 in January, down from a reading of 66.7 in December.
Stocks also failed to get much of a lift from a report published before the market opened that showed the U.S. housing market is sustaining its recovery.
The Standard & Poor's/Case-Shiller 20-city home price index rose 5.5 percent in November compared with the same month a year ago, pushed higher by rising sales and a tighter supply of available homes.
“The turnaround in the housing market is for real,” said Peter Cardillo, chief market economist at Rockwell Global Capital, who says the decline in consumer confidence will likely prove to be temporary as home prices rise. He predicts that the S&P 500 may climb as high as 1,575 this quarter as investor optimism about the economic recovery grows.
The Federal Reserve started a two-day meeting Tuesday. Investors will also be looking at the release of their statement Wednesday for clues about the outlook for the economy and interest rates.
The yield on the 10-year Treasury note rose by four basis points to 2 percent. The yield, which moves inversely to its price, is at its highest level since April.