Hopes dimmed that recent trade negotiations between the United States and China would bear fruit, as China indicated further talks were needed and US Treasury Secretary Steven Mnuchin said the next round of tariffs on Chinese imports are on track to go into effect on Dec. 15 if a deal has not been reached by then.

And while US President Donald Trump hailed his phase 1 of the US-China trade deal "by far, the biggest deal ever made," no deal was committed to paper and most tariffs on Chinese imports remain in effect. "Investors are reverting to what truly matters which is corporate profits, digesting Friday's gains and now looking towards the earnings season," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "It's not surprising that markets are on hold."

Third-quarter reporting season bursts through the starting gate on Tuesday, with major US banks expected to report a 1.2% decline in earnings, their first year-on-year drop in three years, due in part to low interest rates and trade tensions. Analysts expect S&P 500 earnings to have contracted in the third quarter by 3.2%, according to Refinitiv data, marking the first decrease since the earnings recession that ended in 2016.

That's down from the 12.1% gain seen a year ago and the 0.8% advance forecast last quarter. The Dow Jones Industrial Average rose 34.96 points, or 0.13%, to 26,851.55, the S&P 500 gained 0.73 points, or 0.02%, to 2,971 and the Nasdaq Composite added 5.48 points, or 0.07%, to 8,062.51.

Of the 11 major sectors in the S&P 500, five were trading in the red, with utilities suffering the largest percentage loss. Shares of Harley-Davidson Inc after halting production of its electric bikes after discovering a glitch in final quality checks. The motorcycle maker's stock was up 0.4%.

Fastenal Co was down 1.9% after two brokerages downgraded the stock. The company had logged its best day in three decades on Friday after reporting strong results. Nike Inc advanced 1.2% after Bank of America Merrill Lynch upgraded the sportswear maker's stock to "neutral" from "underperform". Construction and engineering company AECOM gained 6.2% after agreeing to sell its management services unit to private equity firms for about $2.4 billion.

Declining issues outnumbered advancing ones on the NYSE by a 1.28-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favoured decliners. The S&P 500 posted two new 52-week highs and three new lows; the Nasdaq Composite recorded 17 new highs and 97 new lows.

Copyright Reuters, 2019