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Investors were reluctant to make big bets even though a report showed U.S. private employers added more jobs than expected in January.

The S&P 500 started to look overbought again after reaching 2 1/2-year highs on Tuesday. A key measure of the rally's strength suggests stocks are vulnerable to a correction, analysts said.

The PHLX Semiconductor Index .SOX was running into resistance around 450 after back-to-back closes above that level for the first time since November 2007. Chips are considered a leading indicator for the broader market.

"If the market looks like it's ready for a 5 percent or more correction, what's one of the sectors at the top of my list to be out of? For sure it's the semiconductors," said Vinny Catalano, chief investment strategist at Blue Marble Research in New York.

The Dow closed on Tuesday above the milestone 12,000 level for the first time since June 2008, and the S&P closed above the 1,300 level for the first time since August 2008.

Investors on Wednesday kept an eye on protests in Egypt as violent street clashes erupted. Concerns that protests could spread to other countries in the region have pressured equities in recent sessions.

The Market Vectors Egypt Index ETF (EGPT.P), which consists of shares of companies in Egypt, fell 3.7 percent after rising for two consecutive days.

The Dow Jones industrial average .DJI rose 1.81 points, or 0.02 percent, at 12,041.97. The Standard & Poor's 500 Index .SPX was down 3.56 points, or 0.27 percent, at 1,304.03. The Nasdaq Composite Index .IXIC was down 1.63 points, or 0.06 percent, at 2,749.56.

Joseph Hargett, a strategist at Schaeffer's Investment Research, said the Dow needs to stay above 12,000 firmly as a show of short-term support. "The resistance now resides in the 12,100-12,200 area."

After a pullback late last week, the S&P 500 has started to look overbought by some measures. The index is more than one standard deviation above its 50-day moving average and the weekly relative strength index is above 70.

Trading volumes were not seriously affected by a harsh winter storm that brought parts of the U.S. Midwest to a standstill.

The story was different for futures traders in Chicago, which took much of the brunt of the storm.

"It's definitely light downtown here. Pit trading opened late too. ... We're about half-staffed," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago, where over 20 inches of snow had fallen.

Volume on the NYSE, Amex and Nasdaq reached 7.26 billion shares compared to last year's daily average of about 8.47 billion.

But the days of outsize returns on low expenses appear to be ending for Visa, the world's largest credit and debit card processing network. It failed to beat expectations by as much as investors have come to expect, and it has yet to fully assuage investor concerns about how it will cope with new U.S. regulations that may reduce future revenue.

Shares fell about 1 percent in after-hours trading, after closing 2 percent higher at $72.09.

Visa said it expects operating margins to remain around 60 percent for 2011, in what investors said signaled a shift from its earlier days of high revenues and relatively low expenses.

"This quarter is a pretty clear view of the transition that's going on within the business for Visa and most likely for MasterCard," said Jim Tierney, chief investment officer of money management firm W.P. Stewart.

"The business is settling down into a really nice healthy fundamental growth rate that's coming from revenue growth and free cash flow usage instead of operating margin expansion," said Tierney, whose firm owns shares of MasterCard Inc (MA.N) and has owned Visa shares in the past.

He called Visa shares relatively cheap versus historical levels, and said they would be "nicely accretive over time." The are trading at about 14 times 2011 full-year earnings, he said, versus the 20 to 30 times full-year earnings they have traded at in the past.

Total operating expenses rose 17 percent in Visa's fiscal first quarter, ended December 31, from a year earlier to $872 million, while total revenue rose 14 percent from a year earlier to $2.2 billion, in line with expectations. Personnel expenses rose from a year earlier, while Visa spent less on network and processing and on marketing.

"They're firing on all cylinders," said Intrepid Ventures payment consultant Eric Grover. "Everything was positive other than on the regulatory front."

REASSURING ON REGULATION

Visa and MasterCard are facing increased regulation under the U.S. Dodd-Frank financial reform law, which will restrict the fees that merchants pay banks and networks for processing debit card transactions.

Visa's shares fell more than 12 percent in December after the Federal Reserve proposed a 75 percent cut in debit card processing fees, and have not fully recovered since.

The rules are expected to cost the debit card industry some $13 billion of an estimated $23 billion of annual debit card processing fee revenue. Visa and MasterCard are making a furious last-ditch effort in Washington to blunt the law's impact, but industry experts say that effort is likely too little, too late.

Chief Executive Joseph Saunders was undaunted on Wednesday, calling for a "thorough review and revision" of the rules.

"We believe Congress should re-examine the (provision of the Dodd-Frank law) and delay implementation to more carefully consider the complexities and unintended consequences of the provisions," he told investors and analysts during a conference call.

But shares fell about 1.4 percent in after-hours trading, as the company failed to post the outsize profits investors have come to expect. Visa also has yet to address investor fears about how it will cope with looming U.S. regulation.

"It was a good quarter, not a great quarter, in terms of beating expectation and clearly there are more issues at stake," said Signal Hill analyst Mayank Tandon. "The market will be looking for some clarity of how they plan to mitigate the impact" of regulation.

The U.S. Dodd-Frank financial reform law will restrict the fees that merchants pay banks and networks for processing debit card transactions. Visa's shares fell over 12 percent in December, after the Federal Reserve proposed a 75 percent cut to debit card processing fees, and have not fully recovered since.

The world's largest credit and debit card processing network reported a profit of $1.23 per share for its fiscal first quarter, ended December 31.

That compared with a year-ago profit of $763 million or $1.02 per share.

Analysts on average had expected Visa to earn $1.21 per share, according to Thomson Reuters I/B/E/S.

Visa shares closed up about 2 percent at $72.09 on Wednesday.

(Reporting by Maria Aspan; Editing by Steve Orlofsky)

U.S. private employers added 187,000 jobs in January, more than forecast, according to a report from ADP Employer Services.

"This suggests that the jobs momentum is going the right way, and it makes me more optimistic for Friday's payroll report. But it isn't such a blow-out number to allow us to add to gains," said Michael Yoshikami, president and chief investment strategist at YCMNET Advisors in Walnut Creek, California.

S&P 500 futures dropped 2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were off 11 points, and Nasdaq 100 futures fell 2.75 points.

Appliance maker Whirlpool Corp dropped 4.9 percent to $81.20 before the bell after its profit missed expectations.

Time Warner Inc rose 3.2 percent to $33.35 premarket after its profit topped estimates on a 21 percent jump in advertising sales at its cable networks.

Mattel Inc rose 1.4 percent to $24.49 premarket after its profit beat expectations on strong demand for its Barbie and American Girl dolls.

On Tuesday, the Dow and S&P 500 closed at their highest levels since June 2008 after strong earnings and signs of a surge in U.S. manufacturing. The Nasdaq surged almost 2 percent.

(Editing by Jeffrey Benkoe)

The December figure was originally reported as a gain of 297,000 jobs.

The median of estimates from 29 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 145,000 private-sector jobs in January.

The ADP figures come ahead of the U.S. government's much more comprehensive labor market report on Friday, which includes both public and private sector employment.

That report is expected to show a rise in overall nonfarm payrolls of 145,000 in January, based on a Reuters poll of analysts, but a rise in private payrolls of 155,000.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

(Reporting by Caroline Valetkevitch; Editing by Padraic Cassidy)