The Dow and S&P 500 reversed their losses to finish higher Tuesday, but gains were limited as further losses for Apple weighed on the tech sector and as investors hesitated to jump in ahead of some major earnings reports in the coming days.
(Read More: After-Hours Buzz: DELL, GM & More)
The Dow Jones Industrial Average climbed 27.57 points, or 0.20 percent, to end at 13,534.89, led by Caterpillar and Microsoft, logging a five-day winning streak. Hewlett-Packard led the blue-chip laggards.
Meanwhile, the Dow transports closed at a historic high. The index has soared 15 percent over the last two months.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed above 13.
Apple tumbled more than 3 percent to end near $485 a share, touching fresh 11-month lows. Earlier, Nomura Securities lowered its price target on the iPhone maker to $530 from $660 to "reflect signs of weaker-than-expected iPhone 5 sales." (Read More: Can Apple Come Back After Falling?)
In the last few months, analysts have been raising red flags over sales of the iPhone 5, which debuted in September, citing lowered expectations and increasing competition from the likes of Samsung. Apple shares hit an all-time high of $705 a share following the iPhone 5 release and have shed roughly a quarter of their value since.
"Expectations get built up to such a ridiculous level that the slightest rumor deflates the stock," said Rakesh Agrawal, principal analyst at reDesign. "I think it's an incredible value right now. I think there are some structural challenges, but for the company that Apple is, it's a great buy."
On Monday, Federal Reserve Chairman Ben Bernanke urged Congress to raise the debt ceiling, the $16.4 trillion borrowing limit. Earlier this month, Treasury Secretary Timothy Geithner warned the ceiling could be reached by mid-February or early March. (Read More: Bernanke: 'We're Not Out of the Woods' Despite 'Fiscal Cliff' Deal)
Ratings agency Fitch warned policymakers that failure to raise the debt ceiling within a "timely" manner would see the nation's sovereign ratings put under formal review with "highly uncertain" consequences.
Facebook dipped after the social-networking giant announced a 'Graph Search' service, a social search feature allowing users to combine phrases to get content that's been shared on Facebook. Facebook added that its search function uses Microsoft's Bing as a back-up, sending shares of Microsoft higher. User-review site Yelp tumbled after the announcement, while Google rallied after Facebook said the Graph Search is very different from a regular web search.
"This is a natural 'sell the news' reaction," said Jordan Rohan, managing director at senior analyst at Stifel Nicolaus, of Facebooks's pullback. "[However,] Facebook aims to be central in many ways—they want to be much more useful to their users. I think in a couple of years, this will add to [their revenue and earnings.]"
Dell zipped higher to lead the S&P 500 gainers after a report that said a potential buyout of the computer software maker is moving forward and several banks have been tapped for financing of the deal, according to Reuters. In addition, Jefferies and Deutsche Bank both lifted their price target on the company. (Read More: Dell Buyout Has '50-50' Chance: Billionaire Ross)
Among earnings, Lennar posted earnings that topped expectations and the homebuilder reported a seventh-straight jump in new home orders.
"Traders will most likely continue to positioning themselves for tomorrow when the earning season will most likely take center stage," said Ishaq Siddiqi, market strategist at ETX Capital, in a note.
On the economic front, retail sales rose 0.5 percent in December, thanks to a boost in autos, as consumers largely overlooked the threat of higher taxes, according to the Commerce Department. Economists expected sales to edge up 0.2 percent, according to a Reuters poll. Combined, sales climbed 5.2 percent in 2012.
Meanwhile, producer prices declined 0.2 percent in December, slipping for the third-straight month, according to the Labor Department. Economists polled by Reuters had expected a drop of 0.1 percent.
And manufacturing in New York state fell to -7.8, contracting for a sixth-consecutive month in January, according to the New York Federal Reserve. Economists had expected a flat reading, according to a survey by Reuters.
U.S. business inventories rose 0.3 percent in November to a record $1.62 trillion, according to the Commerce Department, in line with expectations.
"The impact of the economic data on the financial markets might be rather short lived as the political wrangling over the raising of the debt ceiling is starting to heat up in Washington spreading increasingly uncertainty which could limit any advances to the upside," said Siddiqi.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
WEDNESDAY: Weekly mortgage applications, CPI, Treasury int'l capital, industrial production, housing market index, Fed's Kocherlakota speaks, oil inventories, Beige Book, Fed's Fisher speaks, OPEC's monthly market report; Earnings from Goldman Sachs, JPMorgan, Bank of NY Mellon, Ebay
THURSDAY: Housing starts, jobless claims, Philadelphia Fed survey, natural gas inventories, Fed's Lockhart speaks, Fed balance sheet, money supply; Earnings from Bank of America, Citigroup, UnitedHealth, BB&T, BlackRock, American Express, Intel, Capital One
FRIDAY: General Electric, Schlumberger, Morgan Stanley
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