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Dow, S&P Close at 5-Year Highs; Apple Falls 2%

The Dow and S&P 500 gained to finish at five-year highs in choppy trading Tuesday, ahead of President Barack Obama's State of the Union address later this evening.

With the Dow's move higher, the blue-chip average is now about 1 percent from its all-time record close of 14,164.53 hit on October 9, 2007. The Dow is up more than 7 percent so far in 2013.

(Read More: After-Hours Buzz: CMCSA, GE, CLF & More)

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The Dow Jones Industrial Average rose 47.46 points, or 0.34 percent, to close at 14,018.70, led by Bank of America.

The S&P 500 added 2.42 points, or 0.16 percent, to finish at 1,519.43. The Nasdaq slid 5.51 points, or 0.17 percent, to end at 3,186.49.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended below 13.

Among key S&P sectors, financials climbed to a fresh four-year high, while techs finished in the red. S&P financial stocks that hit new multi-year highs include T.Rowe Price, American Express and AIG.

Meanwhile, the Russell 2000 index and the S&P MidCap 400 index both reached an all-time high.

"While it may seem like the market's rallied too far too fast, we continue to think that the major averages will follow the small and mid-cap leadership to make all-time highs this year," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "The risk-on trade is there."

(Read More: This Could Be Threshold of a Bull Market: Lloyd Blankfein)

President Barack Obama is scheduled to deliver his annual address at 9 pm ET, and will outline policy goals for his second term. He is expected to focus on the "sequester" of automatic spending cuts that will kick in after March 1 if Congress takes no action to stop them.

(Tune In: The State of the Union Will Air Live on CNBC)

"Everyone's expecting a campaign speech from Obama," said Brian Battle, vice president of trading at Performance Trust Capital Partners. "It will be interesting to see the specifics of how big of an agenda he has an his time frame—that will set the tone for the sequestration spending talks that will happen in the next two weeks."

(Read More: State of the Union May Well Set Tone for Budget Talks)

Apple slumped even after proxy advisory firm Glass Lewis said it backs Apple's proposition 2—the ability for the iPhone maker to issue preferred stock, but with the approval with shareholders. Top proxy firm ISS made a similar recommendation last week.

Earlier, CEO Tim Cook said he will "thoroughly consider" hedge fund manager David Einhorn's cash-return proposal.

"Apple makes bold and ambitious bets on product, and we're conservative financially...To add to that fact, we're returning $45 billion to shareholders through a combination of dividends and buybacks," said Cook, speaking at Goldman Sachs' Technology and Internet conference. "Last quarter alone, the cash flow from operations was over $23 billion. It's an incredible privilege where we can seriously consider returning additional cash to our shareholders. The management team and the board are in very-active discussions. That's what our shareholders want." (Read More: Cook: Apple Doesn't Have 'Depression' Mentality)

Among earnings, Coca-Cola declined to lead the Dow laggards after the beverage giant posted revenue that was slightly below expectations, hurt by weakness in Europe.

Michael Kors soared after the specialty retailer blew past earnings expectations and topped revenue estimates, as same-store sales surged and the company added new stores.

Fossil climbed after the fashion accessories retailer edged past earnings and revenue forecasts, thanks to strong revenue growth in North America and Asia.

Avon Products surged more than 20 percent to lead the S&P 500 gainers after the beauty and personal products company posted better-than-expected earnings.

Cliffs Natural Resources, Buffalo Wild Wings and Clearwire are among notable companies slated to post earnings after the closing bell.

So far, more than 71 percent of S&P 500 companies have posted quarterly results, with 70 percent of companies exceeding earnings expectations and 66 percent topping revenue estimates, according to Thomson Reuters. If all remaining companies report earnings in line with forecasts, earnings will be up 5.3 percent from last year's fourth quarter.

On the tech front, Facebook declined after Bernstein downgraded the social-networking giant to "market perform" from "outperform." And Qualcomm slid after JPMorgan cut its rating on the semiconductor company to "neutral" from "overweight."

On the economic front, small business sentiment edged up in January to 88.9 last month, according to the optimism index from the National Federation of Independent Business, as owners anticipated better business conditions in the next six months, despite higher taxes and looming government spending cuts.

Treasury prices held their losses after the government auctioned $32 billion in 3-year notes at a high yield of 0.411 percent. The bid-to-cover ratio was 3.59.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

WEDNESDAY: Weekly mortgage applications, retail sales, import & export prices, business inventories, oil inventories, Fed's Bullard speaks, 10-yr note auction; Earnings from Deere, Dean Foods, Cisco, Applied Materials, MetLife
THURSDAY: Jobless claims, natural gas inventories, Fed's Bullard speaks, 30-yr bond auction, Fed balance sheet/money supply, 13-F filings; Earnings from General Motors, PepsiCo, Rio Tinto, CBS
FRIDAY: Empire state mfg survey, Treasury int'l capital, industrial production, Fed's Pianalto speaks, consumer sentiment, e-commerce retail sales, credit card default rates reported; Earnings from Campbell

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