Investors turn cautious after big gains

Stock indexes fell Tuesday but retained most of their sharp gains recorded the day before.

Share prices fell only modestly as the market awaited key reports on the government’s assessment of banks’ health and the latest numbers on jobs.

But some investors were happy that the market didn’t give up more of its advances Monday, when the Standard & Poor’s 500 index jumped 3.4% on hopeful housing signs and entered positive territory year to date.

“Today’s action, just drifting around, is not that surprising given Monday’s rally,” said Darin Newsom, a senior analyst at DTN in Omaha.

Many analysts believe it’s good for the market to pause after a big advance, particularly when Wall Street has had its best two-month performance in nearly 35 years. Tuesday’s showing proved that investors weren’t buying with abandon.

On Thursday, the government is expected to release the results of its stress tests on banks. On Friday, the Labor Department is scheduled to issue some of the most closely watched data on Wall Street: the monthly report on the labor market.

The Dow fell 16.09 points, or 0.2%, to 8,410.65.

The Standard & Poor’s 500 index fell 3.44 points, or 0.4%, to 903.80. The modest pullback left the index essentially flat for the year to date. The S&P; 500 is widely used as a benchmark for mutual funds and other investments.

The Nasdaq composite index lost 9.44 points, or 0.5%, to 1,754.12.

The Russell 2,000 index of smaller companies slid 0.8%.

About eight stocks fell for every seven that rose on the New York Stock Exchange.

Investors showed little reaction to the day’s economic data, including an industry report suggesting the service sector contracted for a seventh straight month, though not as much as expected, providing further evidence that the economy’s slide is moderating.

Investors are mindful that the stock market typically turns around, on average, about four months before the economy does, so stocks tend to rise when economic data still aren’t robust. The S&P; 500 is up 34% and the Dow is up 28% since the indexes fell to 12-year lows on March 9.

Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab & Co., said the economy could have stopped sliding.

“There is some chance -- it may not be more than a slim chance -- but some chance that we may actually already be out of the recession,” she said.

Overseas, key stock indexes rose 2.2% in Britain and slipped 1% in Germany and 0.4% in France.

Markets in Japan were closed for a holiday.