Stocks closed narrowly mixed in choppy trading Monday, as investors seemed to take a breather following last week's sharp rally and amid worries over when the Fed might scale back its stimulus program.
The S&P 500 erased 0.57 points, to close at 1,642.81. And the Nasdaq edged up 4.55 points, to finish at 3,473.77. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 15.
Among key S&P sectors, telecoms led the gainers, while industrials lagged.
The ratings agency raised the U.S. sovereign credit outlook to "stable" from "negative," with a current rating of AA , adding that the likelihood of a near-term downgrade is "less than one in three."
"Under our criteria, the credit strengths of the U.S. include its resilient economy, its monetary credibility, and the U.S. dollar's status as the world's key reserve currency," according to the S&P. "Similarly, in our view, the U.S.'s credit weaknesses, compared with higher rated sovereigns, include its fiscal performance, its debt burden, and the effectiveness of its fiscal policymaking."
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"Anytime we see something positive on the U.S. fiscal situation or the global economy, the market will see a blip—good news continues to be bad news in relation to the equity market," said Keith Bliss, senior vice president at Cuttone & Co. "The Fed has a delicate situation in front of them—can the market really sustain a pared-back support level and if the Fed does decide to scale back, how elegantly can they do it?"
Stocks whipsawed in the last several weeks as investors continued to question when the Federal Reserve could begin to taper its asset-purchase program. Most recently, St. Louis Fed President James Bullard said labor market conditions have improved since last summer, suggesting the central bank could slow the pace of purchases, though the low inflation readings may mean the Fed can maintain its program for a longer time frame.
Bullard is a voting member of the Fed's policy-setting committee this year.
Last week, the non-farm payroll report showed the U.S. added 175,000 jobs in May, indicating the economy was expanding modestly, but not enough to convince the Federal Reserve to pare back its bond-buying program.
Apple unveiled an Internet radio service, which will be a part of its overhauled mobile software. The iTunes Radio, will be free with ads across the Apple devices. In addition, the company also announced a new operating system for the Mac PC called "Mavericks." Still, shares slipped following the announcement.
Facebook jumped after Stifel Nicolaus raised its rating on the social-networking giant to "buy" from "hold," adding that the company presents "one of the most compelling investments in the Internet sector right now," as the fears of declining engagement and poor ad efficacy have already been discounted into shares.
Intel edged higher after Jefferies raised its price target on the chipmaker to $27 from $24.
Elsewhere in the tech sector, Google could pay more than $1 billion for navigation and traffic application Waze, sources familiar with the negotiations told Reuters.
McDonald's rose after the fast-food giant said its global same-store sales gained 2.6 percent in May, thanks to its expanded offerings for late-night breakfasts, modified menu options, and benefited from advertising value-priced meals.
Among pharmaceuticals, Elan rejected a takeover bid from Royalty Pharma and will evaluate inquiries from other prospective buyers.
Meanwhile, AstraZeneca gained after the company said it will buy privately-held U.S. drugmaker Pearl Therapeutics in a deal worth up to $1.15 billion.
Asian stocks rose on Monday with Japan's benchmark Nikkei closing up nearly 5 percent, rebounding from Friday's two-month closing low, thanks to a strong GDP revision and a weaker yen. The rally provided relief to investors, who have been on edge amid the recent volatility in Japanese stocks. Bank of Japan (BoJ) is scheduled to hold a two-day meeting later this week amid talk that it could announce some measures to curb volatility in the Japanese government bond (JGB) market.
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Meanwhile, China reported weaker-than-expected trade data, slowing growth in fixed asset investments, and a big drop in producer prices. Australian and Chinese markets were closed for public holidays.
Looking ahead, notable data from the U.S. this week include retail sales, weekly jobless claims, producer price index and consumer sentiment.
—By CNBC's JeeYeon Park. Follow JeeYeon on Twitter: @JeeYeonParkCNBC
Coming Up This Week:
TUESDAY: Small biz optimism index, wholesale inventories, 3-yr note auction, Facebook shareholder mtg, Lululemon shareholder mtg, NewsCorp shareholer Mtg
WEDNESDAY: MBA mortgage applications, oil inventories, 10-yr note auction, Treasury budget, Capitol Hill summit, Caterpillar shareholder mtg; Earnings from H&R Block, Men's Wearhouse
THURSDAY: Jobless claims, retail sales, import & export prices, business inventories, natural gas inventories, 30-yr bond auction, Fed balance sheet/money supply, Groupon shareholder mtg; Earnings from Casey's General Store
FRIDAY: Producer price index, current account, industrial production, consumer sentiment
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