U.S. equities and the euro slid on Tuesday after weaker-than-expected U.S. economic data added to gloom over ebbing hopes for a Greek debt restructuring deal.
Markets had started the session on a more optimistic note, with Greek Prime Minister Lucas Papademos saying late on Monday that he hoped to reach a deal with private creditors over restructuring 200 billion euros of debt by the end of the week.
But that optimism faded as traders saw little progress in resolving the euro zone sovereign debt crisis after a summit of regional leaders on Monday.
A steeper-than-expected decline in U.S. home prices in November and a souring in consumer confidence in January weighed further on markets, highlighting the hurdles for the economic recovery in the United States, the world's largest economy.
With a muddled outlook for corporate earnings in coming weeks, investors pulled back from riskier assets such as stocks and the euro.
Every time there is a summit, there is a market hope of progress on the European debt crisis, but while they agreed on the financial bailout fund, the problems of Greece and now Portugal are unsolved. There is no solution in immediate sight, said Joseph Trevisani, chief market strategist at Worldwide Markets, in Woodcliff Lake, New Jersey.
Near-bankrupt Greece struggled to show its foreign lenders it can ram through spending cuts and labour reform in exchange for a crucial debt swap deal and a 130 billion euro bailout package needed to avoid an unruly default in March.
The euro fell 0.4 percent against the dollar to $1.3073, but it was on track to close out January up about 0.9 percent against the greenback, its first monthly advance since October.
Against the yen, the euro fell to 99.67, for a rise of 0.14 percent this month.
The dollar also fell against the yen, under pressure after the U.S. Federal Reserve said last week it was likely to keep interest rates near zero until late 2014.
The greenback slipped as low as 76.13 yen, its lowest since Japan intervened in currency markets in late October, stoking fears the central bank could step into markets again.
More recently, the dollar was off 0.09 percent at 76.22 yen. The dollar's 0.9 percent loss against the yen in January extended two straight down months against the Japanese currency.
On Wall Street, stocks mostly fell, hurt by the disappointing economic data and by an unclear earnings season picture. Stocks have rallied sharply since last year, partly on hopes the U.S. economy will dodge a recession in Europe.
The consumer confidence decline sort of lends credence to this argument that the bears have been using - that the only thing that has been creating better economic numbers has been inventory restocking and once the restocking is done the feeling is that it was a temporary blip, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
So once you start to get some negative numbers, especially around the consumer, it lends to the argument that GDP growth is not really there and it is going to go back to zero.
The Dow Jones industrial average <.DJI> dropped 20.81 points, or 0.16 percent, to 12,632.91. The Standard & Poor's 500 Index <.SPX> dropped 0.60 point, or 0.05 percent, to 1,312.41. The Nasdaq Composite Index <.IXIC> gained 1.90 points, or 0.07 percent, to 2,813.84.
Earnings of Exxon Mobil Corp
According to Thomson Reuters data, only 60 percent of companies in the S&P 500 that have reported results have topped Wall Street expectations, below the beat rate in recent quarters at this stage of earnings season.
For the month, the Dow ended up 3.4 percent, the S&P 500 ended up 4.4 percent and the Nasdaq ended up 8 percent.
Robert Sluymer, a technical analyst at RBC Capital in New York, said depressed U.S. interest rates and a stall in gains in the price of copper, a key industrial metal, are pointing to a short-term reversal in economically sensitive sectors, such as materials and banks, that have led the rally.
More evidence of the pullback or pause continues to develop, led by banks, with global growth themes, represented by copper, just beginning to pause under resistance at its 200-day moving average, he wrote in a research note. Bond yields have still yet to confirm the pro risk rebound.
The benchmark 10-year U.S. Treasury note was up 14/32, the yield at 1.7953 percent.
European stocks closed higher on renewed hopes for a Greek debt deal, though the weak U.S. data capped gains.
The FTSEurofirst 300 <.FTEU3> index of top European shares rose 0.6 percent to close at 1,037.05 and post a 3.6 percent gain in January.
MSCI's all-country world stock index <.MIWD00000PUS> rose 0.27 percent to 316.53, buoyed by an early rally in Asia. Emerging markets <.MSCIEF> continued to rally, up 1.1 percent.
Brent crude and U.S. crude prices wavered as the disappointing U.S. data reined in prices.
U.S. crude oil futures fell for a third straight day, settling at $98.48 a barrel. Brent crude oil futures for March delivery settled higher at $110.98 a barrel.