U.S. stocks edged lower on Tuesday following three days of gains, but further losses may be limited as investors have adapted to a defensive strategy.

The CBOE Volatility index <.VIX> fell 1.9 percent to 20.21, not far from its level before the crisis in Japan sparked a huge spike. That suggests investors are more sanguine about the continuing problems in Japan, the Middle East and North Africa.

Recently the VIX has moved in the opposite direction to the S&P 500.

There's a relative calmness in markets as investors plot their next moves, even though we're flying through fog with all the issues that remain uncertain, said Jeffrey Davis, who oversees $5 billion as chief investment officer at Lee Munder Capital Group in Boston.

Fighting in Libya and unrest in Yemen have contributed to rising oil prices, which has dragged on equities. April U.S. crude futures rose 1.2 percent while Brent rose 30 cents to $115.26 a barrel.

Davis said the crisis had put investors into conservative positions, which could limit future downside. Most investors are pretty safe now, and I suspect the VIX should continue to settle back down gradually.

European Central Bank President Jean-Claude Trichet and other ECB policymakers have reiterated they are ready to act quickly to guard against inflation.

The Dow Jones industrial average <.DJI> was down 13.36 points, or 0.11 percent, at 12,023.17. The Standard & Poor's 500 Index <.SPX> was down 3.00 points, or 0.23 percent, at 1,295.38. The Nasdaq Composite Index <.IXIC> was down 6.47 points, or 0.24 percent, at 2,685.62.

Walgreen Co was the biggest percentage loser in the S&P, falling after it reported its quarterly results.

One of the index's top percentage gainers was Netflix Inc , which rose 3 percent to $219.19 after Credit Suisse upgraded the stock to outperform.

Also on the upside, Sprint Nextel Corp gained 3 percent to $4.50 in a rebound from the previous day's hefty losses.

The chief executive of Verizon Wireless said he has no interest in buying Sprint Nextel even as the company stands to lose its top position in the U.S. wireless market because of AT&T Inc's planned purchase of T-Mobile USA.

(Editing by Kenneth Barry)