The S&P and Nasdaq ticked higher on Monday, though persistently below-average volume suggested that investor enthusiasm was waning after gains carried stocks to 2 1/2-year highs last week.

Equities have gained on strong corporate results and the resignation of Egyptian President Hosni Mubarak, which eased tensions in the region for now. Expectations of a pullback by stocks have yet to be fulfilled, though light volume has fed concerns.

The lack of volume hints at a market top, and without heavier action it looks increasingly difficult for us to grow more, said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.

President Barack Obama proposed a federal budget that would cut the U.S. deficit by $1.1 trillion over the next 10 years. Congress must approve the plan, and Republicans, who are in the majority in the House, said it did not curb spending enough.

The budget provides $8 billion for clean energy, but big drugmakers could take a hit from generic competition under two proposals put forth in the plan.

Among alternative energy companies, Trina Solar gained 5.8 percent to $28.96 while GT Solar International climbed 2 percent to $11.42. Pharmaceutical maker Merck & Co , a Dow component, slid 0.7 percent to $32.83.

The S&P 500 has gained nearly 13 percent since the start of December and is within a few percentage points of fully recovering from the financial crisis low hit on March 6, 2009. Some traders said they see residual strength in the market, with investors willing to buy on any declines in prices.

We wouldn't be surprised to see a pullback, but longer term we think the market has room to grow, said Mitch Rubin, chief investment officer at RiverPark Advisors in New York. Because of that, we would use any pullback to add to our positions.

The Dow Jones industrial average <.DJI> was down 9.04 points, or 0.07 percent, at 12,264.22. The Standard & Poor's 500 Index <.SPX> was up 1.68 points, or 0.13 percent, at 1,330.83. The Nasdaq Composite Index <.IXIC> was up 7.86 points, or 0.28 percent, at 2,817.30.

Wal-Mart Stores Inc was one of the worst performers on the Dow after JPMorgan downgraded the stock, seeing weak traffic and lower market share for the retail giant in 2011. Shares fell 1.2 percent to $55.03.

China's trade surplus fell to its lowest level in nine months in January as imports surged, helping to lift Asian markets and sending European commodity stocks higher.

The data also boosted North American natural resource shares. Freeport McMoRan Copper & Gold Inc rose 4.6 percent to $56 while Alcoa Inc rose 1.5 percent to $17.64 and was one of the Dow's top gainers.

New deals continued a string of recent merger and acquisition activity. EchoStar Corp agreed to buy Hughes Communications Inc for about $1.33 billion, while private equity firm Clayton, Dubilier & Rice agreed to take Emergency Medical Services Corp private for about $3 billion.

Shares of Hughes fell 3.9 percent to $59.40 while EchoStar rose 1.7 percent to $30.38. Emergency Medical fell almost 11 percent to $62.93.

General Electric Co plans to buy the well support division of British energy services firm John Wood Group Plc for about $2.8 billion in the latest move to boost its presence in oil services. GE rose 0.9 percent to $21.53.

(Editing by Kenneth Barry)