While stocks moved to the downside in early trading on Tuesday, selling pressure waned not long after the open and the markets managed to stage a recovery over the course of the trading day.
The major averages bounced well off their early lows, with the Dow and the S&P 500 climbing into positive territory. However, the Nasdaq remained stuck in the red due to a notable loss by Apple (AAPL).
The Nasdaq ended the day down 6.72 points or 0.2 percent at 3,110.78, while the Dow rose 27.57 points or 0.2 percent to 13,534.89 and the S&P 500 edged up 1.66 points or 0.1 percent to 1,472.34.
The early weakness on Wall Street was partly due to worries about continued gridlock in Washington regarding the debt ceiling.
While President Barack Obama has indicated that he will not debate raising the debt limit, Republicans have called for any increase in the debt ceiling to be tied to additional spending cuts.
Nonetheless, the release of an upbeat report on U.S. retail sales helped to limit the downside for the markets and contributed to the turnaround.
The report showed that retail sales rose by 0.5 percent in December following a revised 0.4 percent increase in November. Economists had expected sales to edge up by 0.2 percent.
Excluding a 1.6 percent increase in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.3 percent in December compared to a 0.1 percent drop in November. The increase in ex-auto sales matched economist estimates.
However, Rob Carnell, chief international economist at ING, said the "good news is likely to be short-lived," noting that the expiration of the payroll tax cuts will lead to a "nasty knock to wages in the first quarter of 2013."
A separate report from the Labor Department showed a slightly bigger than expected drop in producer prices in December, while the New York Federal Reserve said its index of regional manufacturing activity remained negative for the sixth consecutive month in January.
Trading activity remained somewhat subdued, as traders continue to wait for earnings season to pick up steam before making any significant moves.
Most of the major sectors ended the day showing only modest moves, contributing to the relatively lackluster close by the broader markets.
Nonetheless, considerable strength emerged among healthcare provider stocks, as reflected by the 1.9 percent gain posted by the Morgan Stanley Healthcare Payor Index. With the gain, the index reached a new record closing high.
Networking, oil service, and retail stocks also moved moderately higher over the course of the session, while modest weakness remained visible among semiconductor stocks.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index advanced by 0.7 percent, Hong Kong's Hang Seng Index edged down by 0.1 percent.
The major European markets also ended the day mixed. The U.K.'s FTSE 100 Index inched up by 0.2 percent, while the French CAC 40 Index fell 0.3 percent and the German DAX Index slid 0.7 percent.
In the bond market, treasuries ended the day modestly higher, extending a recent upward move. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 1.831 percent.
While traders are likely to keep an eye on any developments in Washington, trading on Wednesday could also be impacted by the release of reports on consumer prices, industrial production, and homebuilder confidence. The Federal Reserve is also due to release its Beige Book report.
On the earnings front, financial giants JP Morgan (JPM) and Goldman Sachs (GS) are among the companies due to release their quarterly results before the start of trading on Wednesday.
by RTT Staff Writer
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