U.S. stocks edged lower Tuesday, as grocers weighed on the market in the wake of a broad downgrade, but an unexpected rise in factory orders kept the losses in check.

The Dow Jones Industrial Average recently shed 7 points, or 0.1%, to 11664, one day after closing at a 28-month high.

The Nasdaq Composite fell 0.4% to 2680. The Standard & Poor's 500-stock index lost 0.3% to 1268.

Traders said the market's moves will likely be modest until 2 p.m. EST, when the U.S. Federal Reserve releases the minutes from its latest meeting.

Investors are very focused on the macro-economic environment right now, said Russell Croft, co-manager of the Croft Value Fund.

"A lot of strategists and chief investment officers out there seem pretty positive for the stock market this year," he said. But "it's one thing to say you're bullish and it's another to see people act on it," he said.

Food retailers in the S&P 500 fell Tuesday after Bank of Montreal downgraded Safeway, Vitamin Shoppe, and Whole Foods to marketperform from outperform, noting limited upside. Shares of Safeway fell 3.9%, Vitamin Shoppe was off 4.9% and Whole Foods shed 3.3%. BMO also reduced its estimates for Supervalu, noting the chain's inability to drive traffic, and Kroger, saying the fiscal year 2011 consensus could be too high given the challenging environment. Supervalu tumbled 8.5%, while Kroger lost 2%.

Morgan Stanley also cut Safeway and Supervalu to underweight from equalweight, noting Supervalu's strategy to reduce prices will collide with inflationary food costs.

However, the market pared steeper earlier declines after the Commerce Department reported that U.S. factory goods orders unexpectedly rose 0.7% in November. Economists surveyed by Dow Jones Newswires had forecast a 0.1% decline.

The telecommunications sector also gained, as shares of Motorola Mobility Holdings rose 7.8% and Motorola Solutions gained 0.2% as Motorola's long-awaited split into two entities officially took place Tuesday. Motorola Mobility consists of the company's consumer-focused smartphone and set-top box business, while Motorola Solutions focuses on handheld communication devices and public-safety radios.

The dollar strengthened against both the euro and the yen. The euro reversed earlier gains to trade recently at $1.3308, down from $1.3351 late Monday in New York.

The U.S. dollar index, which tracks the currency against a basket of others, rose 0.4%. Crude-oil prices slipped, while gold futures declined. Demand for U.S. Treasurys increased, pushing yield on the 10-year note down to 3.32%.

Among stocks in focus, U.S.-listed shares of BP rose 1.9%, touching a six-month high following reports that compensation payouts for the Gulf oil spill may be much lower than expected and lingering rumors that the company is a takeover target.

Borders Group plunged 9.4% after the book retailer's Counsel Thomas Carney and Chief Information Officer D. Scott Laverty resigned. On Tuesday, a unit of closely held Ingram Industries said it would continue to supply books to Borders despite the chain's difficult financial situation.

Drugstore chain Rite Aid gained 2.4% after its same-store sales rose 0.6% from a year earlier in December, exceeding analysts' expectations and marking the first monthly growth since May 2009.