United States stocks held modest losses into the latter hours of the trading session, as wrangling over a potential budget deal in Washington continued.
The Dow Jones Industrial Average fell 48 points, or 0.3%, to 15,254 points.
The S&P 500 index dipped three points, or 0.2%, to 1,707 points.
The Nasdaq Composite Index edged down three points, or 0.1%, to 3,812 points.
Traders said trading volume was relatively light as investors hung back and watched for political developments.
"People are taking a 'wait and see' approach," said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago.
"At this point, there's no reason to buy, but there's no reason to sell."
Investors have gotten more frustrated in recent weeks as the first partial government shutdown in 17 years drags on.
"We're being held hostage by the headlines," said John Lynch, Charlotte, N.C.-based regional chief investment officer with Wells Fargo Private Bank.
"What [the standoff] does is scare our clients. We have to make sure we're in front of them, and they're not altering their long-term allocations on volatile day-to-day trading."
Stocks pulled off their morning lows as House Republicans said they were working on a bill to reopen the federal government and avoid a potential US default on its debt but didn't provide much detail. Senate leaders said late Monday they were close to a deal. Thursday is the deadline set by the Treasury Department to raise the federal borrowing limit.
"I think we're still seeing some gamesmanship here," said Mr Lynch.
Late last week, stocks dropped and measures of stock-market volatility jumped as little progress appeared to be made, but stocks recovered much of their losses in following days. The Dow gained 525 points, or 3.6%, in the last four sessions. The S&P 500 closed Monday within 1% of its record high, while the Nasdaq 100 ended at a 13-year high.
"Over the last week, the market has really called Washington's bluff," said Mr Larson. "That's why we've rallied. Most ultimately expect a deal to be reached...we've seen this game played far too often to expect anything else."
So if a deal is reached, investors say, it isn't clear how much more room stocks have to run.
"We've kind of gotten our rally around a likely deal," said Bill Stone, chief investment strategist at PNC Asset Management Group. In the case of a deal, "I don't think you get much of a celebration."
Treasurys slipped, with the yield rising to 2.734% from 2.684%, where it settled Friday. Worrying investors was weak demand in an auction of more than $60 billion of new three-month and six-month debt. Many big money managers have been selling short-term Treasury bills amid fears that the government could miss payments on its debt.
Earnings reporting season kicked into high gear Tuesday. While Washington is taking top billing, investors are also keeping an eye on companies' quarterly results and outlooks for next year.
"At some point, with earnings season upon us, it would be very nice for markets to focus on fundamentals instead of this noise out of Washington," said Mr Larson.
Citigroup Inc shares edged down 0.4% after reporting earnings that fell short of analyst expectations, hurt by weak fixed-income revenue.
While PNC's Mr Stone isn't expecting robust earnings growth, he thinks companies can continue to grind out profits. That should mean good things for stocks, he said, particularly because investors aren't expecting strong returns from the bond market.
"Stocks are more attractive than bonds and cash," he said. "I don't think they'll keep up the pace [of gains] they've had, but they still have a good chance of beating out the other two" asset classes.
Among Dow components reporting results, Coca-Cola Co edged down 0.2% as the beverage giant's earnings and revenue were reported in line with expectations. Johnson & Johnson advanced 0.4% after its results topped forecasts, and it raised its full-year earnings outlook.
Mr Stone and other investors said they will be keeping an eye on how much a burgeoning recovery in European economies will affect US corporate results.
"At least Europe is on the mend," said Mr Stone. "It'll be interesting to hear what [companies] say about their European businesses."
European stocks saw strong gains. Germany's DAX index rose 0.9% to close at a record high, boosted by upbeat data. The UK's FTSE 100 was 0.6% higher and France's CAC 40 rose 0.8%. The benchmark Stoxx Europe 600 index gained 0.8%. As equities rose, German and British bonds weakened.
Germany's ZEW economic expectations index for October rose to 52.8 from 49.6 in September, beating forecasts for an unchanged reading.
A survey of manufacturing activity in the New York region missed expectations, also helping weigh on stocks. The Federal Reserve Bank of New York's Empire State Manufacturing Survey slipped to 1.52 in October from 6.29 in September, while a slight decline to 5.5 was expected.
The report was released as fewer economic data have been available than usual; the federal government shutdown has halted or delayed the release of some data points, such as this month's government employment report.
"We've got to hang our hat on what we get, right?" said Wells Fargo's Mr Lynch.
Asian markets were mostly higher. Japan's Nikkei ended up 0.3%, Hong Kong's Hang Seng closed 0.5% higher and Korea's Kospi rose 1%. China's Shanghai Composite bucked the trend, closing down 0.5%.
In currency markets, the dollar edged up against the euro, while China's yuan briefly hit a record high against the dollar Tuesday, with the dollar at 6.1011 yuan. The People's Bank of China fixed the dollar-yuan pair at 6.1412 Tuesday, having set it at a record low of 6.1406 Monday following dollar weakness overseas. The yuan is allowed to trade 1% above or below the fixing.