Stocks ended off session lows but the Dow still finished in negative territory Wednesday, as investors took a pause amid a lack of significant market catalysts and after the S&P briefly hit its highest level since December 2007.
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"The S&P 500's advance may be in need of a rest, but not to RIP, in our opinion," wrote Sam Stovall, chief equity strategist at S&P Capital IQ. "Despite ongoing political uncertainties and not-too-distant resistance levels, market multiples appear either fairly valued or modestly attractive to us. In addition, companies are increasingly interested in raising internal investments."
The Dow Jones Industrial Average slipped 35.79 points, to end at 13,982.91, dragged by McDonald's. General Electric was the biggest gainer on the blue-chip index. The Dow is now about 1 percent from hitting an all-time high, reached in October 2007.
The eked out a gain of 0.90 points, to close at 1,520.33 after hitting its best level since December 2007. The Nasdaq added 10.39 points, to finish at 3,196.88.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended near 13.
Among key S&P sectors, financials and telecoms edged lower, while industrials rose.
"To think that the market is going to move up in a linear fashion in the short term is just not going to happen and a little consolidation period wouldn't be bad," said Dan Veru, CIO of Palisade Capital Management. "Still, the market has moved from 'selling the rally' to 'buying the dip'—enough good things are happening to stimulate investors who haven't been in the market. This is a liquidity-driven market and investors tend to under-appreciate how far it can go."
On Tuesday evening, President Barack Obama laid out his second-term agenda in his State of the Union address and attempted to push past the fiscal battles that plagued his first term.
"Let's agree, right here, right now, to keep the people's government open, pay our bills on time, and always uphold the full faith and credit of the United States of America," Obama said in his speech. "Most of us agree that a plan to reduce the deficit must be part of our agenda...But let's be clear: deficit reduction alone is not an economic plan."
However, with Washington so deeply divided, Obama's speech appeared unlikely to go far in helping the Democratic president and his Republican opponents find common ground to ease the ideological gridlock.
Best Buy dropped following a report that the consumer electronics retailer's founder Richard Schulze may be considering alternatives to his buyout plan.
Apple lowered the price of its MacBooks by up to $200 as it revamps its top-end laptops, fueling worries that the company's iPad may be cannibalizing Mac sales. Apple sold 4.1 million Macs in the December quarter, down more than 20 percent from the same period a year earlier.
Separately, Omega Advisors CEO and Chairman Leon Cooperman liquidated his position in Apple and purchased Facebook, according to an SEC filing. Apple declined, while Facebook rallied following the news.
Blackberry tumbled after National Bank released a bearish note on the smartphone maker and reiterated its "underperform" rating, citing worries over the company's service fees.
McDonald's slumped after Cowen reduced its February comparable sales for the fast-food giant to below consensus.
Time Warner is in preliminary talks with potential buyers to sell some of its Time publishing assets. Shares were slightly higher following the news. CEO Jeff Bewkes said while has has no immediate plans, the company is exploring various options.
Comcast rallied after the company announced that it will buy General Electric's entire 49 percent common equity stake in NBCUniversal for approximately $16.7 billion. Comcast also increased its dividend by 20 percent and said will repurchase $2 billion in stock in 2013. GE, meanwhile, said the sale will allow it to return more cash to shareholders. GE's board increased the size of its share repurchase plan to $35 billion and said it plans to buy back about $10 billion in shares this year. Credit Suisse raised its rating on Comcast to "outperform" from "neutral" and increased its price target to $48 from $40.
In addition, Comcast reported earnings of 52 cents a share on revenue of $15.94 billion. (Read More: Comcast CEO: 'Bullish and Optimistic' About NBCU)
Cliffs Natural Resources plunged to lead the S&P 500 laggards after the coal company posted a quarterly loss and slashed its dividend by 76 percent. Rivals Alpha Natural Resources and Peabody Energy also traded lower.
Dean Foods posted better-than-expected earnings thanks to cost cuts. But shares slumped after the company said it has decided retain up to 19.9 percent of its WhiteWave dairy line, as analysts expressed skepticism about the future of the milk business amid volatile costs and intense price competition from store brands.
Merck edged lower after the pharmaceutical giant said it sees first-quarter earnings of between 76 cents a share and 78 cents a share, excluding one-time items, well below current Wall Street expectations of 86 cents a share, citing the impact of the Venezuelan government's intention to devalue its currency.
Network equipment maker and Dow component Cisco is slated to report earnings after the closing bell. Other notable companies scheduled to post results include WholeFoods, Applied Materials and MetLife.
Groupon soared after Stern Agee upgraded the daily-deal website to "buy" from "neutral."
On the economic front, retail sales eked out a gain in January as tax increases and rising gasoline prices held consumers back from spending, according to the Commerce Department. And import prices climbed in the same period, according to the Labor Department, gaining for the first time since October as fuel prices jumped. Export prices also logged a modest increase.
And business inventories edged up 0.1 percent, according to the Commerce Department.
Weekly mortgage applications fell last week, with purchase and refinance demand drying up as interest rates rose for the fourth week in a row, according to the Mortgage Bankers Association. (Read More: Mortgage Mess Still Mires Recovery)
Treasurys extended their losses after the government auctioned $24 billion in 10-year notes, at a high yield of 2.046 percent. The bid-to-cover ratio, an indicator of demand, was a weak 2.68, compared to a recent 10-auction average of 2.96.
"Auction performance has been volatile recently at the 10-year sector, with refunding month auctions tending to underperform," wrote Barclays analysts Ajay Rajadhyaksha and Dean Maki. "Foreign investor participation has declined steadily in the sector, but has been mostly offset by an increase in domestic fund participation. While the sector has not cheapened recently, the price action over the previous six auctions suggests that it has not needed a set-up."
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
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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