Investor sentiment seemed to swing toward embracing good news as a buying opportunity, rather than selling on the news for a quick profit as was the case over the past few months. But as oil prices rose and stocks plummeted in late trading, it was clear that Wall Street remained susceptible to any smallest negative news.

Benchmark crude oil traded at a record-high $41.50 per barrel in the futures market, up 96 cents and reigniting lingering fears of inflation in the markets.

"We’ve had strong earnings and have seen oil prices come down a bit over the past few days," said Peter Cardillo, chief strategist and senior vice president for S.W. Bach & Co. "But we need those trends to continue in order to sustain any kind of rally."

According to preliminary calculations, the Dow dropped 30.80, or 0.3 percent, to 9,937.71. The Dow had been up 123.99 earlier in the session.

Broader stock indicators were narrowly mixed. The tech-focused Nasdaq composite index gained just 0.35, or 0.02 percent, to 1,898.17, while the Standard & Poor’s 500 index was down 2.81, or 0.3 percent, at 1,088.68.

Few market-moving catalysts remain now that earnings season is winding down, and another geopolitical incident — such as Monday’s assassination of the Iraqi Governing Council president — could see stocks falling to new near-term lows. Even without major events to move the markets, maintaining a rally will be difficult.

"The markets will really be stuck in a range for a while," said Russ Koesterich, U.S. equity strategist at State Street Corp. "I think you break of the range when you get some feeling from the Fed that they don’t see a problem with inflation. That could be a while — even after the elections."

However, some investors remained bullish. If the Federal Reserve raises benchmark interest rates in June, as is widely expected, the removal of uncertainty for the market could create a buying opportunity — as long as oil prices can be brought under control and overseas events cooperate.

"If the Fed moves in June with a small rate hike and a very benign statement, and we see oil decline under $40 (per barrel), the combination of those two is going to be very powerful for the market," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. "There’s money to be made between the first Fed rate hike and the election, even with some volatility that we’re sure to find there."