Stocks retreated overnight as investor wariness about the outlook for the EU debt crisis, in particular Greece, offset hopes that the US central bank will act decisively later this week to bolster the world's biggest economy.
In late afternoon trading in New York, the Dow Jones Industrial Average edged 0.04 per cent lower, the Standard & Poor's 500 slid 0.18 per cent, while the Nasdaq Composite Index fell 0.61 per cent.
Some believe a clear signal from the Federal Reserve Chairman Ben Bernanke on Thursday will draw out many investors waiting on the sidelines.
"There is a huge potential for a tremendous rally," Dave Rovelli, managing director of US equity trading at Canaccord Adams. "And if we get to 1,440 [for the S&P 500], that's what everybody is looking for. Everybody is looking at whether Bernanke institutes QE3."
Others also see strength ahead. US stocks will climb 12 per cent through the end of 2013, driving the S&P 500 to a record, as an improvement in capital investment and industrial production boost earnings, Citigroup strategists led by Tobias Levkovich wrote in a report dated September 7.
"Attractive valuation, credit dynamics and implied earnings growth all support market appreciation even as sentiment is not as constructive," Levkovich wrote in the report.
Profits in the S&P 500 Index are expected to grow 11 per cent in 2013, according to estimates compiled by Bloomberg.
Still, signs of trouble remain. Hewlett Packard now plans to fire 29,000 employees, boosting the total number of job cuts by 2,000 over the next two years. Bankrupt Eastman Kodak also is firing more staff.
Meanwhile, the US Treasury this week is set to auction a total of US$66 billion of bonds maturing in three, 10 and 30 years.
"The market is nervous about taking down supply in this environment," Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA, told Bloomberg.
Europe's Stoxx 600 Index finished the day with a 0.2 per cent decline on the previous close.
The battle in Greece continues as the country is trying to secure its next tranche of an international bailout amid falling short of meeting the requirements. Greek political leaders have yet to agree on where to make further spending cuts.
In Germany, Chancellor Angela Merkel won political support for her support for the ECB's plan to buy bonds of some of the most indebted EU members to stabilise financial markets.
The support comes a day before Germany's constitutional court will rule on the legality of the EU's proposed rescue fund. While the court is expected to approve Germany's participation in the fund, it also is expected to limit future moves by the government.