Stocks Turn Lower, Led by Industrials

Stocks turned mixed Friday after news Congress may be close to a budget deal, which would avert a government shutdown at midnight tonight.

The Dow Jones Industrial Average fell less than 10 points a day after a volatile sessiontriggered by news of a second earthquake in Japan. The earthquake wasn't as bad as initially feared, and stocks largely recovered by the end of the session, with the Dow falling just 17 points.

Among Dow components, Cisco and Home Depot fell, while Merck and Pfizer rose.

The S&P 500 traded flat, while the Nasdaq declined slightly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to 17.

Among key S&P sectors, industrials and financials fell, while energy and health care rose.

Among commodities, gold soared to yet another new record, trading above $1,468 an ounce, while the dollar sank.Oil prices, meanwhile, jumped to new records amid attacks on Libyan oil fields.

London Brent crude surged above $124 a barrel, while U.S. light crude rose above $111.

The budget negotiations haven't been a huge factor in trading Friday as "it's universally thought there is going to be a deal," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets.

Even if no agreement was reached, "It would have to be a prolonged slowdown for the market to really react," Kruszenski said.

Of greater interest to traders is the start of earnings season, which unofficially begins next Monday when Alcoa releases results after the market closes.

"Earnings season will be kicking off here soon, and people are clearing up some positions in that respect," Kruszenski said.

About a third of the economists, fund managers and strategists who responded to a CNBC Fed surveyexpect the Federal Reserve to raise interest rates this year, twice as many who thought that would be the case last month.

Investors also have an eye on budget negotiations in Washington D.C., where the President Obama and the U.S. Congress have yet to reach an agreement, although lawmakers appear to be not far apart in terms of spending cuts. Democrats say the dispute centers on funding for Planned Parenthood, while Republicans say there are $6.5 billion in cuts still in dispute.

The government will effectively close down at midnight if Obama and Republican Speaker of the House John Boehner and Senate Democratic leader Harry Reid, cannot come to an agreement over the size of the Federal Budget.

"The whole thing appears to be silly from the market perspective," says John Canally, economist at LPL Financial. But, Canally adds, a government shutdown could have real effects on the economy.

One of the concerns is whether economic data released by agencies such as the Commerce Department or the Bureau of Labor Statistics will be made available.

"Near term we’re going to be flying blind on some of the data just at a juncture when you want to know," Canally said. (Read more: A Government Shutdown Could Shut Down Wall Street).

Toyota announced Friday morning it would resume production at its plants in Japan, bringing some relief for the automaker, although the company will resume at half capacity. And shares of Tokyo Electric Power gained after Mizuho Securities reiterated its "outperform" rating on the operator of a crippled nuclear plant and doubled its price target for the stock.

Expedia soared after news it would spin-off TripAdvisorinto a separate publicly-traded company.

Seagate Technology also jumped a day after reinstating its dividend and revising upward its forecast for fiscal third-quarter revenue and margins.

Retailers saw more activity on Friday than other sectors as investors continued to digest same-store sales figures released Thursday, and brokerages revised price targets and ratings on several stocks.

Among those affected was BJ's , which gained after Goldman Sachs raised the wholesale retailer to "buy" from "neutral," and added BJ's to its "conviction buy" list. The brokerage also raised its price target for the stock to $59 a share from $49, and said it represented a better value than Costco . Goldman, meanwhile, cut Costco to "neutral" from "buy," although it raised its price target for BJ's rival to $81 a share from $80.

Target traded flat after Jefferies cut the discount retailer's price target to $59 a share from $64, while Buckle fell after Keybanc cut its rating on the teen retailer to "hold" from "buy," citing valuation.

In economic news, U.S. wholesale inventories rose1.0 percent to $473.9 billion, the highest level since December 2000, according to the Commerce Department. Wholesale inventories also rose 1.0 percent in January.

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