After falling sharply over the course of the two previous sessions, stocks fluctuated throughout the trading day on Wednesday before ending the session mixed.
While the Dow and the S&P 500 managed to finish the day modestly higher, the Nasdaq fell to its lowest closing level in a month.
The Nasdaq slid 17.06 points or 0.5 percent to 3,677.78, while the Dow crept up 26.45 points or 0.2 percent to 14,802.98 and the S&P 500 inched up 0.95 points or 0.1 percent to 1,656.40.
The choppy trading on Wall Street came as traders weighed positive sentiment generated by news of the nomination of Janet Yellen as Federal Reserve Chairman against continued concerns about the ongoing government shutdown.
President Barack Obama officially announced his nomination of Yellen to replace Ben Bernanke as Fed Chief late in the trading day, although White House officials confirmed the news last night.
Yellen, who currently serves as Vice Chair of the Fed, was widely seen as the frontrunner for the nomination after former White House economic advisor Larry Summers withdrew from consideration for the post last month.
Yellen is seen as having a similar outlook on monetary policy as Bernanke, who championed the Fed's controversial $85 billion per month bond-buying program.
"The outlook for monetary policy will be little changed when Janet Yellen replaces Ben Bernanke as Fed Chair at the end of January," Capital Economics said in a research note.
"At this stage, Yellen is unquestionably the best candidate," the firm added. "But there is a slightly bigger risk that under her stewardship, the Fed will fail to tighten monetary policy in time once the recovery gathers momentum, eventually triggering an unwanted surge in inflation."
However, traders also continued to keep a close eye on developments in Washington, where lawmakers remain at an impasse over funding the government and raising the debt limit.
Obama seemed to offer a ray of hope by suggesting that he would negotiate with Republicans after short-term spending and debt limit bills are passed, but House Speaker John Boehner, R-Ohio, quickly shot down that proposal as "unconditional surrender" by the GOP.
Investors still largely expect a deal to be struck before the debt limit deadline on October 17th, although recent Republican comments downplaying the risk of default have increased the jitters on Wall Street.
Among individual stocks, shares of Alcoa (AA) rose by 2 percent after the aluminum giant reported better than expected third quarter results and reaffirmed its global aluminum demand growth forecast for the year.
Alcoa is no longer a Dow component, but the release of the company's quarterly results is still seen by many as the unofficial start of earnings season.
While many of the major sectors ended the day showing only modest moves, considerable weakness remained visible among biotechnology stocks. The NYSE Arca Biotechnology Index regained some ground after hitting a three-month low but still fell by 1.6 percent.
Among biotech stocks, shares of Ariad Pharmaceuticals (ARIA) plummeted by 66 percent after the oncology company said it is pausing patient enrollment in all clinical studies involving its leukemia drug Iclusig.
Electronic storage and networking stocks also saw notable weakness on the day, helping to keep the tech-heavy Nasdaq in negative territory.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index advanced by 1 percent, while Hong Kong's Hang Seng Index ended the day down by 0.6 percent.
Meanwhile, the major European markets all ended the day in the red. While the French CAC 40 Index edged down by 0.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index dropped by 0.4 percent and 0.5 percent, respectively.
In the bond market, treasuries closed modestly lower but well off their worst levels of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.4 basis points to 2.65 percent.
Trading on Thursday may be impacted by the release of the Labor Department's weekly jobless claims report, which is among the few economic reports still being released during the government shutdown.
by RTT Staff Writer
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