NEW YORK Global shares fell and bond prices rose on Tuesday, with investors cautious ahead of a U.S. earnings season expected to show sluggish growth in quarterly corporate profits.
The dollar and euro fell against the yen as investors booked profits in the aftermath of swift and significant gains, but looser Bank of Japan monetary policy should limit the yen's upside.
The dollar was last down 0.75 percent at 87.11 yen, well off a 2-1/2-year high hit last Friday. The euro fell 1.02 percent at 113.96 yen.
U.S. corporate profits are expected to be higher than the third quarter's lacklustre results, but analysts' estimates are down sharply from where they were in October.
Quarterly earnings are expected to grow 2.8 percent, according to Thomson Reuters data.
Alcoa Inc reported a fourth-quarter profit of $242 million as cost cuts helped offset a drop in aluminum prices, marking the unofficial start to the earnings season as the first Dow component to release results.
Alcoa shares rose 7 cents to $9.20 in after-hours trade after closing 0.33 percent higher at $9.13 from Monday's close.
Early reports have suggested some signs of improvement. Monsanto Co reported strong first-quarter results and raised its full-year outlook, sending its shares 2.67 percent higher to close at $98.50.
Sears Holding Corp reported sales for the holiday season that were not as weak as many had feared, but the stock sank as the company's chief executive stepped down unexpectedly. Shares fell 6.43 percent to $40.16.
If earnings growth appears to be "less bad" than expected, that would fuel a near-term uptick in the market, according to Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management in New York. "There are still ample areas for concern," he added, citing policy worries in Washington and uneven economic growth.
The Dow Jones industrial average closed down 55.44 points, or 0.41 percent, at 13,328.85. The Standard & Poor's 500 Index fell 4.74 points, or 0.32 percent, to 1,457.15. The Nasdaq Composite Index slid 7.01 points, or 0.23 percent, at 3,091.81.
Global shares measured by MSCI's all-country world index fell 0.33 percent to 345.73.
The FTSEurofirst 300 index of top European shares closed down 0.1 percent at 1,160.20 as data showed the euro zone economy may be stabilizing, though at a weak level.
The euro slid 0.25 to 1.3082 against the dollar.
Euro zone business confidence improved again in December, but unemployment reached a record and households held back from spending in the run-up to Christmas, suggesting a recovery from recession will be slow. German industrial orders also fell more than forecast due to a sharp drop in demand from abroad.
"Things are bad. It is still consistent with recession, but at least they have stopped deteriorating," said Deutsche Bank economist Gilles Moec.
Prices for U.S. Treasuries rose as higher yields proved attractive and the first sale of coupon-bearing Treasury debt for the year drew strong non-dealer bidding.
The Treasury sold $32 billion of three-year notes on Tuesday at a high yield of 0.385 percent, just about where the market had expected.
The high direct takedown in this and the previous three-year auction could signal "a shift in investor bidding patterns at auctions, where buyers bypass dealers and go straight to the Treasury, while still able to clear the auction near the WI (when-issued) levels," wrote Nomura analysts after the sale.
The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 1.8656 percent.
In commodity and metals markets, Brent crude oil rose 54 cents to settle at $111.94 per barrel, while U.S. light crude settled down 4 cents at $93.15.
Brent's premium over the U.S. West Texas Intermediate benchmark widened by more than 50 cents, with traders citing the start of the annual reweighting of the S&P GSCI commodity index, one of two leading indices for investors.
Copper rose 0.1 percent and gold rose $12.26 to $1,658.90 ahead of data on Thursday from China and the monthly meeting of the European Central Bank.
"The market is underpinned by expectations that a cyclical rebounding out of China will be positive for industrial metals, and there is more positive sentiment now in the market," said Robin Bhar, analyst at Societe Generale.
(Additional reporting by Rodrigo Campos; editing by Dan Grebler and Kenneth Barry)