The S&P 500 and the Nasdaq slipped on Monday as China's economic data and a Federal Reserve monetary policy statement due later this week gave traders reason to pause after a three-day rally.
China's trade balance plunged $31.5 billion into the red in February as imports swamped exports to leave the largest deficit in at least a decade and fuel doubts about the extent to which frail foreign demand or seasonal distortion drove the drop.
The data cast some doubt on global economic growth prospects after Friday's U.S. payrolls report pointed to an improving domestic economy and pushed equities to their fourth straight weekly gain.
Investors will also eye Tuesday's statement from the U.S. central bank's Federal Open Market Committee to see whether the Fed will tamp down expectations of more easing, which might make it difficult to extend the rally.
People are somewhat weary ahead of tomorrow's FOMC meeting, said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois. Not that they expect any groundbreaking news out of it. It's just the normal caution ahead of a Fed meeting.
Markets were recently rattled after Fed Chairman Ben Bernanke stopped short of giving a strong signal of more stimulus during congressional testimony.
The Dow Jones industrial average gained 27.06 points, or 0.21 percent, to 12,949.08.. The S&P 500 Index dipped 1.78 points, or 0.13 percent, to 1,369.09. The Nasdaq Composite fell 7.91 points, or 0.26 percent, to 2,980.43.
The S&P 500, close to nearly a four-year high set two weeks ago, faces strong technical resistance.
Bank stocks were among the day's biggest losers as a report looms from the Fed on the capital adequacy of the largest U.S. lenders.
Jankovskis said there was speculation the Fed was contemplating more aggressive downside scenarios than some of the banks had presented.
That could prevent some of the banks from upping dividends or engaging in buybacks, and in some cases, might actually require them to go back to the market to raise capital, he said.
The KBW bank index fell 1 percent, with JPMorgan Chase down 1.5 percent at $40.41 and SunTrust Banks off 2.7 percent at $21.83.
Oil prices retreated, with Brent hovering near $125 a barrel as global economy and demand worries overshadowed hopes that Middle East supply concerns would ease.
Tidewater Inc's shares slumped 5.1 percent to $55.60 after the offshore vessels provider said Sonatide, its partnership with Angola's state oil company, will not take up new charters or extend existing ones in the country until the two parties resolve ongoing joint venture talks.
The PHLX oil services index fell 2.5 percent.
Molycorp Inc is set to buy Neo Material Technologies Inc in a $1.3 billion cash-and-share deal that will give Molycorp access to rare earth processing capabilities and patents. Molycorp gained 1 percent to $31.19.
Youku Inc rose 20.1 percent to $30.04 after China's largest online video company said it will buy second-ranked Tudou Holdings Ltd in an all-stock deal valued at more than $1 billion. Tudou shares shot up 145.8 percent to $37.83.
(Reporting by Rodrigo Campos; Editing by Jan Paschal)