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Stocks end day mixed; S&P slightly below record

Stocks recovered most of their earlier losses to close narrowly mixed Wednesday, with the S&P 500 finishing slightly below its closing high, as ongoing economic and political concerns over Europe kept a lid on gains.

(Read More: It's Back! Dark Clouds From Europe Stall US Bull Run)

The Dow Jones Industrial Average shaved most of its early losses. JPMorgan led the blue-chip laggards, while Intel gained. The Dow was down as much as 120 points earlier before recovering.

The S&P 500 and the Nasdaq erased most of their losses to close narrowly mixed. The S&P has zigzagged between gains and losses for the last seven sessions.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near.

Major averages ended near their best ever levels on Tuesday, with the Dow posting a new high and S&P 500 finishing less than 2 points from its closing peak.

(Read More:Bulls Revved Up to Take Out Next Stocks Milestone)

Among key S&P sectors, telecoms were lower, while health care rose.

On the economic front, pending home sales slid 0.4 percent in February, according to the National Association of Realtors. Economists polled by Reuters expected a 0.2 percent decline, compared with a 4.5 percent rise in the prior month.

(Read More: Housing Headwinds Still Exist: Shiller)

In Europe, political deadlock continued in Italy as the country's main leadership candidate Pier Luigi's Bersani reportedly said that only an "insane person" would want to govern the nation now, adding that Italy is "in a mess and faces a difficult year ahead."

Bersani made the remark after the anti-establishment "Five Star Movement" party headed by comedian Beppe Grillo again refused to form a coalition government with Bersani, thwarting his latest attempts to form a governing alliance.

(Read More: Hey Euro Zone, You Overrate Yourself: Moody's)

A political stalemate since its inconclusive elections in late February has spiked concerns over how the country will handle its growing debt problems. Italy paid more to borrow over five years than it has since October at its latest auction, indicating worries over its financial situation.

The euro extended its losses below $1.28 against the U.S. greenback, its lowest level since late November.

Elsewhere in Europe, Cyprus is finalizing financial control measures to prevent a run on its banks, which have been shut for a week since the country agreed to a conditional 10 billion euro ($12.8 billion) bailout from international lenders. Cypriots have been lining up to withdraw cash from ATMs, with limits at 100 euros a day for some banks.

"Banks will open on Thursday ... We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals," Cypriot Finance Minister Michael Sarris said in an interview on Cypriot television.

"Cyprus is a reason to remind investors that Europe is a source of risk, but I'm not sure Cyprus itself is going to be enough [for a market pullback from the recent run-up]," said Thomas Lee, chief U.S. equity strategist at JPMorgan. "The big picture still points to a major secular bull market being underway, with at least another four years left, led by durable goods."

Trading is likely to be thin ahead of the three-day Easter weekend. U.S. markets will be closed Friday for Good Friday.

Comcast edged higher after the Supreme Court ruled in favor of the cable company in an antitrust case over how much the company charged subscribers. (Comcast is the parent company of NBCUniversal.)

Wal-Mart declined after the world's largest retailer said that probes into alleged foreign bribery at its stores are likely to result in a financial loss. Separately, the company said it would start using stores to get Internet orders to shoppers faster, amid growing competition from online rivals such as Amazon.com.

Boeing edged lower as its 787 Dreamliners face a temporary ban on some of the transocean flights, which would be a costly new challenge for the company.

Cliffs Natural Resources plunged to lead the S&P 500 laggards after Morgan Stanley downgraded the iron ore and metallurgical coal producer to "underweight" from "equal-weight." Rivals Alpha Natural Resources and Peabody Energy also traded lower.

Mattress Firm soared more than 10 percent after the mattress maker provided solid guidance for fiscal 2013. In addition, Raymond James upgraded the company to "outperform" from "market perform." Other mattress companies bounced higher, including Tempur-Pedic and Select Comfort.

Weekly mortgage applications rebounded last week as interest rates pulled back for the first time in three weeks, according to the Mortgage Bankers Association.

Paychex and Red Hat are among notable companies scheduled to report earnings after the closing bell.

Earlier, Boston Fed President Eric Rosengren supported the central bank's asset purchase program, saying it is having the desired impact of speeding up the pace of the recovery and should be continued through the end of the year. Meanwhile, Cleveland Fed President Sandra Pianalto said the Federal Reserve should consider tapering off the pace of its bond-buying stimulus plan if the U.S. economy continues to show signs of improvement.

And Minneapolis Fed President Narayana Kocherlakota said the Fed should ease monetary policy further to bring the unemployment rate down at a faster rate. Kocherlakota expects the jobless rate to be close to 7 percent by the end of 2014, and forecasts growth around 2.5 percent this year and 3 percent next year.

Treasury prices held their gains after the government auctioned $35 billion in 5-year notes at a high yield of 0.760 percent. The bid-to-cover ratio, an indicator of demand, was 2.73.

(Read More: Global 'Triple-A Ratings Club' Shrinks 60 Percent)

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)