United States stocks pared losses as investors digested a stronger-than-expected reading on the US services industry and looked ahead to key jobs data later in the week.
The Dow Jones Industrial Average shed 25 points, or 0.2%, to 15,614 points. Earlier in the day, the blue-chip index fell as much as 117 points.
The S&P 500 index gave up four points, or 0.2%, to 1,764 points, with telecommunications and materials shares leading declines.
The Nasdaq Composite Index slipped three points, or 0.1%, to 3,934 points.
On Monday, the S&P 500 rose 0.4% to end just 0.2% below the record high close of 1,771.95 a week ago. The index has gained 24% this year.
The Institute for Supply Management's non-manufacturing purchasing managers index for October rose to 55.4 from 54.4 in September, bucking expectations for a fall. The ISM Employment index also showed strength, with a gain to 56.2 from 52.7 the prior month.
"The numbers are better than expected," said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Ill.
"But the bond market is showing some concern that the Fed might be closer to tapering based on these numbers."
The yield on the 10-year Treasury note jumped to 2.680%, the highest level in three weeks, from 2.602% late Monday.
Strong data suggest the government shutdown "was more a publicity event than anything else," said Mr Jankovskis. That means the Federal Reserve might be able to begin scaling back stimulus efforts sooner than expected, he said. Last week, the Fed made no change to its $US85 billion-a-month bond-buying program at the end of its most recent policy-setting meeting.
But investors will also be looking ahead to the first read of third-quarter economic-growth data due out on Thursday and the closely watched October employment report due Friday.
For the next month, that jobs data, as well as consumer-sentiment data, will be key as investors look for signs of how the economy faired during October's 16-day government shutdown, said Russ Koesterich, global chief investment strategist with BlackRock.
"We want to see how consumer sentiment was affected, and how the labor market handled it," said Mr Koesterich. But the October federal jobs data, which is due out Friday, is difficult to predict, he said. "The data is going to be erratic for a while," he said. "There is a lot of noise around the number."
Colin Cieszynski, senior market analyst at CMC Markets, said he thinks the market is consolidating as investors look ahead to the economic news. And he said that while earnings have been pretty good overall, the reporting season is almost over, so that isn't the driver of the market it has been.
"I don't think there is anything particularly driving this [weakness]," Mr Cieszynski said. "Everything is sort of settling out, as people are just waiting for the next shoes to fall."
Investors will also be paying attention to speeches by the presidents of the Federal Reserve Banks of San Francisco and Richmond later in the session for clues on when the Fed might start reducing stimulus measures by cutting back on its bond buying. Some think the Fed could begin tapering purchases as early as December.
In corporate news, Tesla Motors fell as the electronic-car maker prepares to announce third-quarter results after the closing bell. The stock had lost 17% in October, but has gained 9.5% the past two sessions, pushing year-to-date gains to more than 400%.
CVS Caremark rose after the drugstore chain reported third-quarter earnings and revenue that exceeded analyst estimates and raised its full-year earnings outlook, amid strength in its pharmacy business.
AOL jumped despite third-quarter profit falling 90% on restructuring costs and write-downs related to its Patch local news operations, among other things, as revenue beat expectations. The write-downs are part of Chief Executive Tim Armstrong's attempt to transform AOL from a subscription-driven online service into an ad-supported content company.
December crude-oil futures declined 1.1% to $93.59 a barrel, while December gold futures eased 0.3% to $1,310.60 an ounce.
European markets declined after the European Commission lowered its growth outlook for the euro-zone economy. The Stoxx Europe 600 lost 0.3%, pulling back from the highest levels seen in more than five years on Monday. Germany's DAX 30 index fell 0.4%, weighed down by disappointing results from auto maker BMW, and France's CAC 40 index gave up 0.9%.
The European Commission cut its 2014 economic growth forecast for the 17-nation euro zone to 1.1% from 1.2%, and raised its forecast for the unemployment rate to 12.2% from 12.1%. The European Commission's 2013 forecast was unchanged, with expectations for the economy to contract 0.4% and for an unemployment rate of 12.2%.
The report helped bolster expectations that the European Central Bank will increase stimulus by lowering interest rates after its policy meeting on Thursday.
That kept pressure on the euro, which was on track for a sixth loss against the dollar in seven sessions. The dollar also gained against the yen.
Asian markets were mostly higher. China's Shanghai Composite gained 0.4% amid hopes the Communist Party will push ahead with economic reforms. Japan's Nikkei Stock edged up 0.2%.