Stocks fell on Tuesday as optimism over a possible deal by Greece in its debt wrangling dissipated after a batch of weaker-than-expected economic reports.

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.

But data showing home prices fell more than expected in November, business activity in the Midwest grew at a slower rate than anticipated and consumer confidence unexpectedly fell in January and undermined the early positive tone.

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> was down 48.17 points, or 0.38 percent, at 12,605.55. The Standard & Poor's 500 Index <.SPX> was off 2.76 points, or 0.21 percent, at 1,310.25. The Nasdaq Composite Index <.IXIC> took off 5.09 points, or 0.18 percent, at 2,806.85.

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 major's profit narrowly beat expectations as rising oil prices offset falling margins for chemicals and fuel, and production fell short of some estimates.

Pharmaceutical wholesaler McKesson Corp gained nearly 4 percent to $81.74 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.

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.

The S&P is 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.

Drugmaker heavyweights Pfizer Inc
and Eli Lilly & Co both topped expectations. But Pfizer trimmed its 2012 view and Lilly repeated an outlook calling for a drop in 2012 earnings.

Lilly edged up 1.3 percent $39.75 and Pfizer dipped 1.3 percent to $21.30.

Transportation stocks dipped as United Parcel Service Inc gave up early gains to fall 1 percent to $75.42. 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.

The Dow Jones Transportation index <.DJT> shed 0.3 percent.

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 2.3 percent to $21.63.

(Corrects to show S&P home price data is for November, not December)

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)