Stocks were little changed on Wednesday, weighed by gains in the dollar and higher bond yields, but analysts said they expect the market to regroup before attempting a rally into year-end.
Benchmark yields hovered at their highest in six months, while the dollar index <.DXY> gained 0.4 percent as the deal to extend tax cuts intensified worries about inflation and the costs of the government's debt burden.
Higher bond yields make it more expensive for consumers and businesses to borrow, while stocks and the dollar have moved in opposite directions of late. A rise in yields and the dollar could also draw money away from equities.
Analysts expect the market to trade sideways for a few days before mounting a final leg up going into the end of the year.
There's still a lot of institutions and mutual funds that are underinvested and underperforming this market, so any and all pullbacks will be short-lived as people continue to push money in and try to catch up with the market, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.
The Dow Jones industrial average <.DJI> edged down 16.92 points, or 0.15 percent, at 11,342.24. The Standard & Poor's 500 Index <.SPX> was off 1.57 points, or 0.13 percent, to 1,222.18. The Nasdaq Composite Index <.IXIC> added 1.09 points, or 0.04 percent, to 2,599.58.
The S&P faces resistance at the 1,228 level, which represents the 61.8 percent Fibonacci retracement of the 2007-2009 bear market slide, a key technical indicator. The level was confirmed as strong resistance Tuesday after the index broke through during the session but closed below it.
The S&P 500 hit a two-year intraday high on Tuesday, but closed with a small gain.
Steady economic improvement should fuel stock gains through 2011, according to a Reuters poll of investors and strategists, but international concerns could limit advances in the second half of the year.
(Editing by Jeffrey Benkoe)