Consumer spending drives about 70 percent of economic growth, so how confident people are about parting with money is crucial for any economic recovery.
Falling stocks outnumbered gainers by a ratio of five to one in the 30-member Dow, with technology companies leading the decliners. Hewlett-Packard fell 33 cents, or 2.3 percent, to $14.01 and Microsoft Corp. dropped 39 cents, or 1.4 percent, to $27.06.
Stocks may also come under pressure in coming days as investors who have seen their holdings gain this year, decide to sell and book the capital gains tax in 2012 so as to avoid any potential increase in that tax rate next year, according to Kinahan, of TD Ameritrade.
"People who have had a nice year in a particular stock may say 'why not take the hit this year,' " said Kinahan.
Barring a dramatic sell-off in the year's final days of trading, stocks will end the year higher on signs that the U.S. housing market is recovering and the U.S. economy is adding jobs. The Federal Reserve also announced a third-round of its so-called quantitative easing program in September. The program, intended to lower the cost of borrowing and spur lending, helped underpin demand for stocks.
The S&P 500 is 13 percent higher for the year, the Dow is almost 8 percent up and the Nasdaq is nearly 16 percent higher.
Trading volumes were lower than average today before the Christmas holiday Tuesday. The stock market will close at 1 p.m. Monday and will reopen Wednesday.
The yield on the 10-year Treasury note rose 1 basis point to 1.78 percent.
Among other stocks making big moves:
—Herbalife Ltd., the nutritional supplements company, fell $1.21, or 4.4 percent, to $26.06. The stock has tumbled 43 percent this month after William Ackman, the founder and CEO of hedge fund Pershing Square Capital Management L.P., claimed that the nutritional supplements company is a pyramid scheme.
The company said Monday that it would hold an analyst and investor meeting Jan. 10 to discuss the company's business in detail.
AP Writer Steve Peoples contributed to this report from Boston.