Stocks pared their gains Tuesday after a report from Reuters that said Federal authorities are ramping up Wall Street insider trading probes.
Stocks had been trading higher after President Obama defended his tax cut compromise with Republicans in the face of strong Democratic opposition.
The Dow Jones Industrial Average were up only slightly, after gaining more than 80 earlier. Stocks closed mixed in the previous session as the Dow slipped and technology stocks gave a boost to the Nasdaq.
General Electric, Caterpillar and Chevron led blue-chips higher while 3M slipped.
The S&P 500, which had reached intraday highs not seen since September 2008, and the tech-heavy Nasdaq also shaved gains. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
All key S&P 500 sectors rose, led by industrials, consumer staples, and telecom.
Federal authorities were ramping up investigations into insider trading, sending out more than a dozen subpoenas on various firms including the seven firms that confirmed the receipt of subpoenas over the last two weeks, according to a report from Reuters.
No immediate details were available as to which companies had received the subpoenas.
Earlier, stocks rose broadly following news that the tax cuts, first enacted when George W. Bush was president, would be extended for two years according to the agreement Obama reached with Republicans. Obama and Congressional Republicans also worked out a plan to cut payroll taxes.
In a press conference Tuesday afternoon, President Obama strongly defended the compromise, saying it was in the best interest of all Americans.
Word of the agreement was encouraging to Wall Street, which was seeking resolution of the tax cut question, as well as how the new Congress would work with Obama. The compromise, which is still opposed by some Democrats in Congress, removes some uncertainty.
While the earlier rally was solid, it was relatively modest as market participants had already expected a compromise on tax cuts given the strong Republican showing during the mid-term election, and pre-election comments made by Obama as well as John Boehner, the Republican leader of the House of Representatives.
"Most everyone felt this deal had to be done, would be done, the only question was will it get done before Jan. 1," said Marc Pado, market strategist at Cantor Fitzgerald. "Removing that uncertainty is a positive for the market."
Now market participants can focus on what's really important: holiday sales, which will drive corporate earnings in the fourth quarter. Pado's view was companies were well positioned for continued growth. "That will be catalyst for the longer term mainstay of the bull market run," he said.