Stocks Pare Modest Gains Before Close

Stocks pared modest losses just before the close after rising slightly after President Barack Obama delivered his plan for reducing the budget deficit by $4 trillion over 12 years, and as the Federal Reserve confirmed economic growth remains moderate across-the-country.

The Dow Jones Industrial Average rose about 10 points after fluctuating throughout the day, and following a commodity-led swoon in the previous session.

Among Dow components, Caterpillar and Kraft rose, while Boeing and Bank of America declined.

The S&P 500 and tech-heavy Nasdaq gained. If the S&P 500 closes lower today, it will mark the index's worst five-day losing streak since last July. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.

Among key S&P 500 sectors, technology and utilities rose, while materials and financials slumped.

To reduce the deficit requires broad sacrifices, Obama said, adding that hewould not support renewal of the Bush-era tax cuts.

While the market took a more positive turn in the afternoon, trading was thin and largely directionless.

Asset managers who have to be invested are participating, "but they are waiting to see what happens," said Kenneth Polcari, managing director at ICAP Equities.

What investors need is real direction, either from earnings or a "macro" event, Polcari said.

Polcari is keeping an eye on the S&P 500, which at the time was trading right at its 50-day moving average of 1,311. Earlier in the session, S&P 500 futures traded below that level. If the index stays below 1,311, that could become a new upward level of resistance for the market, he said.

Stocks initially got a boost Wednesday from JPMorgan after the second-largest U.S. bank delivered strong results, including earnings of $1.28 per share. However, the bank's shares slipped throughout the session after analysts focused on some weakness in retail banking. (Watch: Inside JPMorgan's Earnings.)

Analyst Mike Mayo of Credit Agricole also said the bank's earnings show signs a credit contraction is underway.

But Jaime Peters, a banking analyst at Morningstar, said JPMorgan's results were strong in investment banking and asset management, and that weakness in the retail bank reflected an unexpected, and short-term, increase in mortgage servicing costs.

And Peters added, a contraction in consumer loans isn't surprising coming out of the so-called Great Recession.

"People are saving more," Peters said, also noting that a growing number of retiring baby boomers are less likely to spend as well.

"That means consumer loan growth will be hard to come by over the next several years," she says. "That will challenge banks to grow their revenue line."

Rivals Wells Fargo , PNC Financial and Citigroup were among banks leading the financial sector lower. Bank of America , which isscheduled to release earnings on Friday, also slipped.

And among techs, search-engine giant Google is slated to report earningsafter-the-bell Thursday.

On the tech front, Riverbed Technology jumped after the tech firm raised its quarterly outlook.

And Zoom Technologies shares soared after the company signed a license agreement with Qualcomm , allowing the Chinese mobile phone maker to develop and sell 3G products using Qualcomm's chip patents.

Earnings season kicked off with a lackluster start Monday after investors were disappointed with Alcoa's weaker-than-expected revenue numbers.

That may be because expectations for a strong earnings season were high, said Jeff Kleintop, chief market strategist at LPL Financial.

"I think what we’re seeing is a flat environment, and that might persist," Kleintop said, adding to expect to see volatility as well.

Kleintop said he is paying close attention during earnings season to what businesses have to say about the effects of rising commodity prices and geopolitical events on their future business outlook.

The effects of disrupted supply chains on future earnings per share for many companies remains uncertain as Japan struggles to return to normal after the devastating earthquake and tsunami last month.

"We’ve seen almost a month of these events having transpired, I think business will have enough color to provide guidance to investors," Kleintop said.

Toyota shares rose even after the Japanese automaker announced that it will stop production in five plants in Europe for several days in April and May due to a supply shortage in Japan. Meanwhile, Nissan said it would use three Japanese holidays in May to make up for lost production time to supply disruptions.

Commodities sank across-the-board on Tuesday after Goldman Sachs released a report calling for a correction in oil. But some traders viewed Goldman's call as simply a chance to take profits and get back in at a lower level.

Oil prices rose, reversing a two-day decline after the government reported that oil inventories gained 1.6 million barrels, while gasoline inventories tumbled 7 million barrels. London Brent crude gained above $121 a barrel, while U.S. light crude climbed above $106. Gold advancedabove $1,460 an ounce, while the dollar slipped against a basket of major currencies.

Materials were weak across the board, including Freeport-McMoran and Southern Copper both down more than 2 percent each.

In M&A activity, Silgan Holdings will buy Graham Packaging for $19.56 a share, or $4.1 billion in a cash and stock deal.

And Schneider Electric is denying it is in takeover talks with Tyco International .

General Electric , meanwhile, traded flat after the conglomerate said a previous report that it planned to return money to the U.S. Treasury was a hoax. GE is a minority shareholder in NBC Universal, CNBC's parent.

And among other Dow components, Wal-Mart gained slightly after the big-box retailer said it is decreasing its electronics department in order to make room for formerly dropped items such as fishing poles, fabric and full-figure fashions.

Treasurys pared their earlier gainsafter the government auctioned $21 billion of 10-year notes, which had a high yield of 3.494 percent and bid-to-cover of 3.13.

In U.S. economic news, the Federal Reserve's Beige Book indicated that the economy continued to improve at a moderate pace across most sectors during the period from mid-February through March.

Retail sales rose 0.4 percent in March, according to the Commerce Department. The gain was the weakest since last June, when sales fell 0.3 percent. Economists surveyed by Reuters had forecasted sales to rise 0.5 percent in March. Excluding autos, retail sales rose 0.8 percent in March compared with a 1.1 percent gain in February.

U.S. business inventories, meanwhile, rose 0.5 percent in February compared to an upwardly revised 1 percent gain in January, the Commerce Department said. Economists surveyed by Reuters had expected inventories to rise by 0.8 percent.

Also in economic news, the Mortgage Banking Association said applications for mortgages and refinancings fell 6.7 percent last week to their lowest levelsince January as interest rates rose.

Investors are waiting for a pivotal speech by President Obama in which the he will explain his vision for tacking the long term US deficit. The President is due speak at 1:30 pm ET. (The speech will be streamed live on CNBC.com).

The speech follows an agreement on the federal budget on Friday between the White House and Congress. But president Obama still wants Congress to raise the country's borrowing limit before a $14.3 trillion debt ceiling is reached as early as mid May.

The Federal Reserve releases its Beige Book of regional economic conditions at 2 p.m. ET.

European shares closed higher, lifted by banks and after strategists suggested there was further upside in the sector.

On Tap This Week:

WEDNESDAY: Beige Book.
THURSDAY: Weekly jobless claims, PPI, 30-year Treasury bond auction, Kocherlakota speaks, Plosser speaks, Lacker speaks, Nestle shareholder meeting; earnings from Hasbro before-the-bell and Google after-the-bell.
FRIDAY: CPI, Empire state manufacturing survey, Treasury international capital, industrial production, consumer sentiment, credit card default rates reported; Evans speaks, Hoenig speaks, G24/International Monetary Affairs meeting; Earnings from Bank of America and Mattel before-the-bell.

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