NEW YORK Stocks spent another session in a tight range on Wednesday, with the S&P 500 ending a few points higher and extending a rally that seems to be happening in slow motion.
The benchmark S&P 500 index finished just a hair away from its highest close in three months, but with earnings season winding down and many traders away, volume was light.
For the next couple of days the greatest influence may be the options market, which is seeing heavy volume in August call and put options clustered around the 1,400 level for the S&P 500.
If the index closes at or very close to 1,400, those options expire worthless on Friday. That means market-makers have an incentive to try to make that happen, or "pin" the index at 1,400.
The S&P 500 was up seven of the past nine sessions but the volume has been extremely light due to summer holidays and a lack of news from Europe. On Wednesday, about 4.79 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 7.84 billion.
"I think we are facing technical resistance at 1,405 (on the S&P 500), which is the level of closing highs in early May. We haven't been at that level since, and until we have a catalyst to move significantly above this, the market is likely to consolidate," said Randy Frederick, managing director of active trading & derivatives at Charles Schwab.
The S&P 500 rallied early in August and reached highs not seen since early May in anticipation that central banks in the United States and the euro zone will take action to stimulate their respective economies in September.
Shares of Deere & Co (DE.N) lost 6.3 percent to $75.10 after the world's largest agricultural equipment maker reported a lower-than-expected quarterly profit on Wednesday, citing weak sales in China, India and other emerging markets. Rival Caterpillar Inc (CAT.N) slipped 0.3 percent to $87.61 as the biggest drag on the Dow.
Staples Inc (SPLS.O) slumped 14.6 percent to $11.49 as the worst performer on the index after the office supply chain reported lower-than-expected quarterly revenue on weak demand in North America, Europe and Australia, and forecast flat sales for the fiscal year.
The Dow Jones industrial average .DJI was down 7.36 points, or 0.06 percent, at 13,164.78. The Standard & Poor's 500 Index .SPX was up 1.60 points, or 0.11 percent, at 1,405.53. The Nasdaq Composite Index .IXIC was up 13.95 points, or 0.46 percent, at 3,030.93.
In economic data, U.S. industrial output expanded 0.6 percent last month, the fastest pace since April. Manufacturing notched another solid advance, hinting at underlying resilience in an economy that has struggled to establish momentum.
The New York Fed's general business conditions index for August missed expectations and contracted for the first time since October 2011. Meanwhile, Labor Department data showed consumer prices were flat in July for a second straight month and the year-over-year increase was the smallest since November 2010.
Data from the National Association of Home Builders showed homebuilder sentiment rose in August to 37, its highest level in more than five years, and above the 35 in July. The PHLX housing sector index .HGX rose 0.3 percent.
(Reporting By Angela Moon; Editing by Kenneth Barry)