Market breadth weakened and a prominent investor retreated from bullish positions as a vulnerable U.S. stock market slipped off 2-1/2-year highs on Tuesday.

Energy and basic materials stocks led the slide in the S&P 500's worst day since January 28, and billionaire investor Ken Fisher told Reuters he is more neutral on stocks than I've been in years.

Volume remained light with 7.1 billion shares changing hands on the combined New York Stock Exchange, NYSE Amex and Nasdaq, below last year's estimated daily average of 8.47 billion.

U.S. retail sales data cast doubts on a rebound in consumer spending, a vital part of the economic recovery, and import prices jumped, while a gauge of manufacturing in New York State climbed to its highest in eight months.

The S&P retail index <.RLX> closed flat after being down earlier in the day.

More and more companies are worried about the price of input, said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

There's a lot of conflicting data. Low volume means there's no conviction either way: whenever you really don't have an idea, you're not trading, she said.

The Dow Jones industrial average <.DJI> lost 41.55 points, or 0.34 percent, at 12,226.64. The Standard & Poor's 500 Index <.SPX> fell 4.31 points, or 0.32 percent, at 1,328.01. The Nasdaq Composite Index <.IXIC> slipped 12.83 points, or 0.46 percent, at 2,804.35.

Shares of JDS Uniphase Corp dropped 10.2 percent to $25.05 after brokerage Bernstein cut its rating on the stock to market-perform from outperform. An index of chipmakers' shares <.SOX> was down 1.1 percent.

The S&P energy sector <.GSPE> carried most of the day's losses, falling 1.1 percent. Brent crude oil fell more than 1 percent on the U.S. retail sales data and as China continued to struggle to keep inflation at bay.

Exxon Mobil was down 2.3 percent to $82.97, following a 2.5 percent gain on Monday.

The S&P 500 has nearly doubled from lows hit in March 2009, but waning volume suggests investors are having a harder time finding value.

I'd not be overly optimistic right now, said Fisher, chief investment officer and founder of Fisher Investments, a money management firm in Woodside, California that oversees about $43 billion in assets.

The spread between daily winners and losers has been narrowing for months, suggesting more of the market's gains are coming from fewer stocks -- generally a sign of a weakening market.

On Tuesday, declining stocks outnumbered advancing ones on the NYSE and the Nasdaq by a ratio of about 8 to 5.

Short- and medium-term the S&P 500 was nearing overbought levels, with more than 79 percent of its components trading above their 20- and 50-day moving averages. But Craig Peskin, co-head of technical analysis research at MF Global in New York, said no major downside move concerns him short term.

Volume has not been that spectacular for a long part of this bull market. We may be ready for a pullback, but this is not a sign of a market top.

Shares of NYSE Euronext fell 3.4 percent at $38.12 after it agreed to be acquired by Deutsche Boerse to create the world's largest exchange operator. The deal dodges key questions that could threaten its completion.

Shares of U.S. exchanges also fell, with Nasdaq OMX Group Inc off 4.6 percent at $28.28, CME Group Inc down 3.7 percent to $291.33 and CBOE Holdings down 5.9 percent to $26.21.

(Additional reporting by Herbert Lash; Editing by James Dalgleish)