Benchmarks ended slightly lower after two back-to-back strong gains ahead of lawmakers’ all important call on budget cuts. Indices erased modest gains in the final minutes of the trading session. Federal Reserve chairman Ben Bernanke’s encouraging comments about the bond buying program lifted the Dow close to a record high on Wednesday. Meanwhile, the U.S economy expanded slightly in the fourth quarter whereas initial claims declined during the previous week. The consumer discretionary sector was the biggest gainer among the S&P 500 industry groups.

The Dow Jones Industrial Average (:DJI) lost 0.2% to close the day at 14,054.49. The S&P 500 shed 0.1% to finish yesterday’s trading session at 1,514.68. The tech-laden Nasdaq Composite Index slipped 0.1% to end at 3,160.19. The fear-gauge CBOE Volatility Index (:VIX) jumped 5.3% to settle at 15.51. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.81 billion shares, above the daily average of 6.46 billion shares. Advancing stocks outnumbered declining stocks. For the 49% that advanced, 48% declined.

Benchmarks are back in the negative territory following two consecutive days of healthy gains. Despite yesterday’s loss, the S&P 500 finished February with four successive months of gains. The blue-chip index gained 1.4%, S&P 500 inched up 1.1% and Nasdaq added 0.6% in the month of February.

Investors will now closely watch the outcome of the all important debate on budget cuts scheduled for today. If no deal is reached today then cuts will take effect starting Friday. President Barack Obama and members of the Congress arranged for a last round of talks to prevent the budget cuts. President Barack Obama said: “Middle-class families can’t keep paying the price for dysfunction in Washington.”

Meanwhile, the Street had some positive domestic economic data on Thursday. According to the “second” estimate of GDP for the fourth-quarter released by the Bureau of Economic Analysis the U.S. economy expanded at a slightly better rate than earlier estimated. The report showed that real gross domestic product increased 0.1% annually in the fourth quarter. But this was below the consensus estimate of an increase of 0.5%. In the third quarter real GDP grew at 3.1%. The increase in real GDP in the fourth-quarter was boosted by positive contributions from personal consumption expenditures (:PCE), nonresidential fixed investment and residential fixed investment.

The U.S. Department of Labor revealed that the number of Americans filing for unemployment benefits declined during the previous week. According to the report, the advance figure for seasonally adjusted initial claims dropped 22,000 to 344,000 from prior week’s revised figure of 366,000. This was below the consensus estimate of 367,000. Initial claims have declined for the third time now in four weeks.

Shares of Mylan Inc. (NASDAQ:MYL) gained 3.6% after the company reported its fourth-quarter results. The company earnings came in above the Street’s estimates but revenue fell short of projections. The company’s profits increased 25% in the fourth-quarter. Mylan said it will purchase a unit of India's Strides Arcolab Ltd for $1.6 billion to widen its presence in the injectable drugs market.

The consumer discretionary sector was the biggest gainer among the S&P 500 industry groups. The Consumer Discretionary SPDR (XLY) gained 0.5%. Stocks such as The Walt Disney Company (NYSE:DIS), Amazon.com, Inc. (NASDAQ:AMZN), The Home Depot, Inc. (NYSE:HD), McDonald's Corporation (NYSE:MCD) and Viacom, Inc. (NASDAQ:VIAB) added 0.2%, 0.4%, 0.7%, 0.2% and 1.1%, respectively.

Housing stocks declined after two back-to-back days of strong gains. The SPDR S&P Homebuilders (XHB) lost 0.3%. Stocks such as Lumber Liquidators Holdings Inc (NYSE:LL), M.D.C. Holdings, Inc. (NYSE:MDC), KB Home (NYSE:KBH), D.R. Horton, Inc. (NYSE:DHI) and PulteGroup, Inc. (NYSE:PHM) lost 0.1%, 0.3%, 1.6%, 1.6% and 0.6%, respectively.