The S&P 500 Index paired some its earlier losses to trade down 0.18 percent at 12 p.m. in New York. It briefly dropped to 1085.55, before recovering to trade at 1,090.18. The Nasdaq Composite Index is slightly positive, gaining 0.03 percent.

On Monday, the stock market had a similar reaction to negative housing data. It pared its earlier gains when disappointing existing home sales was reported at 10:00 am, taking the Nasdaq briefly into negative territory.

The market then recovered as Federal Reserve Chief Ben Bernanke gathered support over the weekend for his confirmation. The S&P 500 closed up 0.4 percent for the day. The Nasdaq, although it gained in afternoon trading, ended slightly down.

Disappointing new home sales were reported at 10:00 am by Census Bureau today. For December, sales of 342,000 homes were down at annualized rate of 7.6 percent from the November figure.

Although the first expiration of the homebuyer tax credit hurt the figure, it was still lower than the expected figure of 366,000, according to a survey conducted by Bloomberg. The stock market immediately dipped lower, before recovering to trade flat for the day.

A few big banks that have strong deposit bases are lifting the market today. Wells Fargo (NYSE:WFC) is up 1.82 percent, Bank of American (NYSE:BAC) is up 1.69 percent, and JPMorgan (NYSE:JPM) 1.59 percent.

Banks that rely more on trading profits failed to join the recovery; Goldman Sachs (NYSE:GS) is down 0.61 percent and Morgan Stanley (NYSE:MS) is down 0.15 percent.

Investors are cautious before words from key officials today. Earlier this morning, Treasury Secretary Tim Giethner testified before the House Committee on Oversight and Government Reform. He denied any wrongdoing in the bailout of American International Group, Inc and insisted it was necessary for the stability of the economy.

Government officials, however, had scathing criticisms of the bailout. Congressman Edolphus Towns said that “he taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse.”

Investors are also waiting to scrutinize a statement from the Federal Open Mark Committee - the Fed’s policy arm - and Obama’s State of the Union address later tonight.

Key issues for investors will be the confirmation of Fed Chairman Ben Bernanke, the fiscal and monetary policy of Washington, and Obama’s stance on bank reforms.

Ben Bernanke New york city