The Dow Jones Industrial Average edged up 1.39 points at 13,550 points. Earlier, the index hit an intraday low of 13,492.68.
Of the Dow's 30 components, eleven traded higher. Among the biggest decliners were Citigroup , down 2% at $30.36, and Walt Disney , down 1.4%.
Bucking the negative trend, shares of Exxon Mobil Corp. gained 1.3% to stand at $94.86, as crude-oil futures rallied. Fellow blue chip Caterpillar Inc. also rose, tacking on 1.6% to $73.91.
The S&P 500 edged up 1.22 points at 1,497, recovering from a session low of 1,488.
The technology-laden Nasdaq Composite rose 10 points, or 0.4%, at 2,723.
Shares of Apple Inc. hit $200 for the first time in the company's history amid strong sales of the company's Macintosh computers, iPods and recently-released iPhone.
"You're probably seeing the Nasdaq reacting to expectations of positive holiday sales of technology-related products," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "That's why you're seeing shares of Apple top $200."
"The concerns brought about by Target are likely weighing on the broader indexes," Pavlik said.
Besides worries about slow overall retail sales, "the other major overhang to this market is this is a continuation of holiday trading," Pavlik said. "I expect volume to be very low today."
On the New York Stock Exchange, more than 503 million shares were traded, with declining stocks outpacing advancing stocks by 16 to 15.
More than 794 million shares exchanged hands on the Nasdaq, with advancers outpacing decliners by 15 to 13.
In a shortened trading session Monday, the Dow rose 99 points, or 0.7%, to finish at 13,549.33.
Mixed retail sales
The S&P Retail Index fell 1.4%.
Shares of Target , the No. 2 U.S. discounter following Wal-Mart, fell 2% to $51.44.
The company warned on Monday that December sales at stores open at least a year, a key industry measure of performance, were running well below plan and might decline. Separately, hedge fund Pershing Square said Monday that it boosted its holding in Target to nearly 10%.
"The Target news and how the holiday season went was the driver this morning," said Peter Bookvar, equity strategist at Miller Tabak.
Shares of department-store mainstay Macy's Inc. tumbled 5% to $25.64.
Holiday retail spending rose 3.6% from a year earlier, led by luxury-goods and electronic-commerce purchases, MasterCard Advisors LLC said on Wednesday.
"Obviously, it's a little disappointment in retail sales and of course the market had a nice run-up going into Christmas," said Peter Cardillo, chief market economist at Avalon Partners, explaining Wednesday morning's declines.
"It's a little bit of profit-taking. Volume is light. We're still on holiday trading volume with Europe closed," Cardillo said.
The big picture
Chuck Lieberman of Advisors Capital Management said investors should look at the big picture, instead of focusing on Target's soft December and another big drop in home prices.
"When you really look at the whole picture, as opposed to focusing on a couple of trees that are doing pretty badly, the economy is doing surprisingly well," Lieberman said. Bad housing news is losing its sting, he noted, and as for retail, "expectations were pretty dismal, and the numbers are coming in above those dismal expectations."
Regarding Wednesday's market weakness, he said: "The market was strong on Monday, and I suspect that's why things are a little bit softer today."
In other economic news, home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shillerprice index released by Standard & Poor's. Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3%, reached in April 1991.
"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index.
News that British billionaire Joseph Lewis increased his stake in Bear Stearns Cos. to 9.57% from 8.01% gave a little bounce to some brokerage stocks, Bookvar said.
Shares of Merrill Lynch & Co. rose 0.7% to $54.31. The investment bank said on Monday that it will raise up to $6.2 billion by placing common stock with Temasek Holdings and Davis Selected Advisors.
Shares of Berkshire Hathaway
gained 1.1% after the company said it will purchase 60% of Marmon Holdings, an industrial group owned by trusts benefiting members of the Pritzker family of Chicago, for $4.5 billion.
Berkshire, the investment firm controlled by the Omaha investor Warren Buffett, also will acquire the rest of Marmon in stages over five to six years, with payment based on earnings.
Shares of MBIA Inc. rallied 8.9% at $21.92 on news that asset manager Davis Selected Advisers owns a 5.1% stake in the bond insurer. Davis said in a filing Wednesday with the Securities and Exchange Commission that it owns 6.4 million shares of MBIA.
In other markets, gold futures rallied $13 to end at $829.50 an ounce on the New York Mercantile Exchange, as dollar weakness boosted investment demand for the precious metal.
In the Nymex energy pits, crude oil for February delivery rose $1.84 to end at $95.97 a barrel, boosted by expectations that U.S. crude inventories fell for a sixth week and worries that Turkish air strikes inside Iraq may cripple oil supplies from the Middle East.
Treasurys couldn't hold the line on modest gains as the stock market pared losses, with prices of bonds and notes edging lower in thin trading and their yields pushing higher despite decent results in the government's auction of two-year notes.
In currencies, the dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 0.6% to 77.145.
European markets were closed on Wednesday for the Boxing Day holiday.
In Asia, stocks finished mostly higher, with Japan's Nikkei 225 ending at its highest level in two weeks.
By Polya Lesova