Stocks edged lower on Tuesday after a batch of weaker-than-expected economic reports gave investors reason to pause after strong gains in world equity markets.

Stocks have rallied sharply since last year, partly on hopes the U.S. economy will dodge the effects of a recession in Europe. But data that showed November U.S. home prices and January business activity in the U.S. Midwest missed expectations, and consumer confidence that unexpectedly fell, tested that theory.

Earnings reports continue to paint a muddled picture. Exxon Mobil Corp fell 2.1 percent to $83.71 and was the biggest drag on both the Dow and S&P 500. The U.S. energy company's profit narrowly beat expectations as rising oil prices offset falling margins for chemicals and fuel, and production fell short of some estimates.

Robert Sluymer, a technical analyst at RBC Capital in New York, said depressed U.S. interest rates and a stalling of gains in industrial metal copper is 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 Dow Jones industrial average <.DJI> was down 28.76 points, or 0.23 percent, at 12,624.96. The Standard & Poor's 500 Index <.SPX> was down 0.98 points, or 0.07 percent, at 1,312.03. The Nasdaq Composite Index <.IXIC> was up 2.28 points, or 0.08 percent, at 2,814.22.

Pharmaceutical wholesaler McKesson Corp gained nearly 3 percent to $81.04 after it reported higher-than-expected quarterly earnings, fueled by growth in its core drug distribution business.

According to Thomson Reuters data, of the 204 companies in the S&P 500 that have reported results so far, 59.8 percent topped estimates, tracking below the beat rate at this stage of the earnings season in recent quarters.

Hopes that Greece would reach a deal with private creditors on a debt swap and receive a bailout to sidestep a chaotic default boosted market sentiment initially.

Shortly after the opening bell, the S&P 500 triggered a bullish technical signal, known as a golden cross, as its 50-day average ticked above its 200-day average. The signal indicates a shift in mid-term momentum and usually means gains in the index six months down the road.

Out of 26 golden crosses since 1962, the S&P 500 gained an average 4.1 percent over the next three months and was positive 73 percent of the time. Over the next six months it gained 6.6 percent and was positive 81 percent of the time, according to Birinyi Associates.

The S&P is still on pace for a 4 percent gain in January, its best month since October. The Dow is up 3 percent, on track for its fourth straight monthly gain, while the Nasdaq is up 7.6 percent.

Results from drugmaker heavyweights Pfizer Inc
and Eli Lilly & Co both topped expectations. But Pfizer trimmed its 2012 outlook and Lilly repeated its forecast for a drop in 2012 earnings.

Lilly edged up 1.2 percent $39.70 and Pfizer dipped 1percent to $21.38.

Transportation stocks dipped as United Parcel Service Inc gave up early gains to fall 0.7 percent to $75.57. The package delivery and logistics group posted a stronger-than-expected quarterly profit, but analysts cited profit-taking and company comments on euro headwinds in the first quarter.

Housing stocks fell after the S&P/Case-Shiller report on U.S. home prices. The PHLX housing index <.HGX> dropped 1.5 percent and the Dow Jones U.S. home construction index <.DJUSHB> declined 1.7 percent. Lennar Corp lost 3.4 percent to $21.38.

(Editing by Padraic Cassidy)