Stocks fell on Wednesday as the dollar rallied after Moody's warned Spain its debt rating could be downgraded, bringing concerns about the euro-zone debt crisis back to the forefront.

The S&P 500 and the Nasdaq traded near session lows as Moody's comments lifted the dollar, which has tended to have a strong inverse relationship with equities of late.

However, positive U.S. data helped offset those concerns as industrial production rose in November at its fastest pace in four months, implying that self-sustaining recovery is now entrenched. An index of manufacturing activity in New York rebounded strongly, adding to the brighter picture.

We had a lot of very positive data today, but we still have persistent euro-zone concerns, which is creating this tussle in the market, said Judy Moses, a San Francisco-based portfolio manager at Evercore Wealth Management, which has about $2.3 billion in assets under management.

Moses added that seasonal issues related to the end of the year could be affecting traders.

Managers don't want to show high cash balances after such a strong year, but at this point, they also want to lock in gains.

The Dow Jones industrial average <.DJI> slipped 29.06 points, or 0.25 percent, to 11,447.03. The Standard & Poor's 500 Index <.SPX> declined 7.42 points, or 0.60 percent, to 1,234.17. The Nasdaq Composite Index <.IXIC> fell 12.55 points, or 0.48 percent, to 2,615.17.

Since 1990, stocks in the S&P 500 have averaged a gain of 1.9 percent over the last 10 trading days of the year, according to Bespoke Investment Group, which also found the winners for the year outperform in the final two weeks while the losers continue to lag.

Regional banks benefited as investors looking to boost returns scooped up stocks that have performed well this year. The S&P 500 is up almost 11 percent so far this year. Regions Financial Corp rose 1.8 percent to $6.31.

We're going into the end of the year and just hit a two-year high, so even though macro data has been better, things haven't perked up so much to lift us farther from here, said Adrian Cronje, chief investment officer at the Atlanta-based Balentine, which has about $800 million in assets under management.

Other stocks that have recently scored sharp gains retreated as investors opted to lock in profits. Netflix Inc slipped 0.6 percent to $177.32, but the stock has surged some 225 percent this year.

Honeywell International Inc fell 1.7 percent to $51.67 after it gave a 2011 profit growth outlook that analysts described as conservative.

Caterpillar Inc rose 1.1 percent to $93.08 after RBC raised its price target to $108 from $98.

A deal that President Barack Obama struck with Republicans to extend the Bush-era tax rates sailed through the U.S. Senate on Wednesday and will soon head to the House of Representatives, where it could face steeper opposition, though it is still expected to pass.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)