But analysts weren’t surprised that investors were having second thoughts.

“It’s unreasonable to think that the market is going to go straight up and never turn back,” said Eric Ross, director of research at Canaccord Adams.

Analysts say investors need more clear evidence of growth to restart the market’s rally, which has stalled as investors grow worried that a weaker dollar, higher commodities prices and rising interest rates will hamper the economy’s recovery. The Standard & Poor’s 500 index is still up 34.8 percent from the 12-year lows it hit in March.

“You’ve got to continue to have a constant flow of good news to push things higher,” said Randy Frederick, director of trading at Charles Schwab. “And we just don’t have that.”

The Dow Jones industrial average fell 107.46, or 1.3 percent, to 8,504.67. The Standard & Poor’s 500 index fell 11.75, or 1.3 percent, to 911.97, while the Nasdaq composite index fell 20.20, or 1.1 percent, to 1,796.18.

On Monday, the Dow tumbled 187 points, or 2.1 percent, putting it back into the red for 2009. Last week, the Dow was up on the year for the first time since January. A stronger dollar sent commodities prices tumbling Monday and that put pressure on energy and material stocks.

The dollar resumed its three-month fall against other major currencies Tuesday, pushing prices for commodities higher.

Analysts contend a pause in the rally is necessary for stocks to move higher. Market watchers tend to be alarmed when the market moves up in an unbroken line and say that suggests indiscriminate buying.

“The market is very overbought right now and what it needs to do is consolidate and it needs to have a series of days like this,” said Jon Merriman, chief executive of Merriman Curhan Ford.

The dollar’s slide came after the Kremlin’s top economic adviser said Russia may put part of its currency reserves in bonds issued by Brazil, China and India.

A weaker dollar, and its impact on commodities prices and Treasury yields, has become one of investors’ main concerns.

While higher commodities prices can indicate improving demand for industrial goods, analysts warn that a jump in prices combined with a weaker dollar could make it more difficult for the economy to emerge from recession.

Light, sweet crude pared fell 15 cents to settle at $70.47 a barrel on the New York Mercantile Exchange. Precious metals, soybeans and coffee were among the other commodities closing higher.

The Commerce Department said home construction jumped in May by the largest amount in three months after hitting a record low in April. Applications for building permits, which are seen as a good indicator of future activity, rose by 4 percent.

The Labor Department said wholesale prices rose less than expected in May as a big jump in the price of gasoline offset a drop in food costs. But the Federal Reserve said industrial production fell a larger-than-expected 1.1 percent in May as the recession hurt demand for manufactured goods including cars, machinery and household appliances.

Treasury yields retreated further, a welcome sign for homeowners. Yields on long-term Treasurys have been climbing as demand for bonds weakens amid a huge surplus of government debt. This is worrisome to investors because Treasury yields are linked to mortgages and other consumer loans, and higher borrowing costs could undermine a recovery in the housing market.

The yield on the benchmark 10-year Treasury note fell to 3.65 percent from 3.72 percent late Monday.

About two stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 4.86 billion shares, up from 4.55 billion a day earlier.

The Russell 2000 index of smaller companies fell 8.09, or 1.6 percent, to 503.74.

Overseas, Japan’s Nikkei stock average slid 2.9 percent. Britain’s FTSE 100 and Germany’s DAX index each rose less than 0.1 percent and France’s CAC-40 slipped 0.2 percent.