U.S. stocks closed little-changed amid investor concerns that more credit troubles may be down the road.
"I think there's still a lot of convincing to do to investors that things are going to work out fairly well," said Sam Stovall, chief investment strategist at Standard & Poor's. "At best, we're going to see a relief rally up to about 1495 or 1500 on the S&P. Then we're going to survey the landscape once again."
Six of the ten S&P 500 sectors traded higher. Volume and volatility were much lower today. Telecom was the best performing sector. Weakness in the financials sector kept stocks from rising. Energy shares also lost ground throughout the session. Technology got a lift from a slew of upgrades, including three brokerage upgrades for BEA Systems. Alcoa was one of the biggest percentage gainers on the Dow. Hewlett-Packard also posted strong gains ahead of its earnings report Thursday.
"The market is beginning to show signs of stabilizing," Peter Cardillo, chief market economist at Avalon Partners, told CNBC.com. "I think we will stay in a trading range and that's what we're seeing today. Volatility will still be around, but the gyrations will be much more limited than what we have seen in the past 10 days."
The European Central Bank injected another $65 billion into the banking system today to try to calm rattled credit markets. The Bank of Japan pumped $5 billion into its market. The Federal Reserve said it added $2 billion of temporary reserves to the U.S. banking system.
Goldman Sachs said it and outside investors would pour $3 billion of new capital into Goldman's Global Equity Opportunities fund, a long-short quantitative hedge fund hurt by recent market volatility.
"I think this is a good sign and a reflection of the liquidity introduction that central banks around the world started last week," said William Rutherford, president of Rutherford Investment Management. "Goldman Sachs seems to be working its problems out, but we still don't know where all the dead bodies are."
Qwest Communications named Edward A. Mueller as its new CEO, replacing Richard C. Notebaert. Mueller was formerly the CEO of Williams-Sonoma .
And former U.S. Federal Reserve Chairman Alan Greenspan is the new advisor to Deutsche Bank's investment banking unit.
On the earnings front, recently listed private-equity firm Blackstone posted a second-quarter net profit of $774.4 million, saying private equity and real estate deals were strong for the period. Blackstone didn't report an earnings per share figure.
Retail sales in July were a bit better than expected, rising 0.3%. Ex-auto, retail sales rose 0.4%.
And the Commerce Department said June business inventories rose 0.4%.
New York light sweet crude futures rose to trade just under $72 a barrel after the formation of a storm in the Atlantic raised concerns about hurricanes.
European Stocks Close Sharply Higher
The major European indexes closed sharply higher as cash injections from central banks improved global liquidity.
Central bank intervention appears to have stabilized short-term stock market pressures, Bob Parker, Vice Chairman of asset management Credit Suisse, told "Squawk Box Europe."
The London FTSE-100, Paris CAC-40 and Frankfurt DAX all posted triple-digit gains.
Morgan Stanley echoed the positive start to the week by raising European equities to "overweight" from "neutral," citing improved an improved risk-reward picture, more anticipated merger activity and the abundance in cash in sovereign wealth funds that could be used to buy stocks.
A high-levelacquisition added to the buoyant mood as Akzo Nobel agreed to buy British rival ICI for about 8 billion pounds ($16.18 billion), the Dutch chemicals company announced Monday. Shares of Akzo Nobel were higher.
Germany's Henkel said it would take over ICI's adhesives and electronic materials businesses, National Starch and Chemical, as part of the acquisition.
Underlying concern remained, however, as Deutsche Postbank told investors at the weekend its level of exposure to the U.S. subprime fallout ran to 600 million euros ($821.8 million), due to its stake in two investment vehicles run by Germany's IKB.
There was more bad news for financial stocks as it emerged BNP Paribas, Deutsche Bank and Commerzbank are among the creditors of U.S.-mortgage casualtyHomeBanc, which filed for Chapter 11 bankruptcy protection last week.
Asian Markets Mixed
Asian markets were mixed with markets pulling back from earlier gains. This is despite steps taken by Asian central banks to calm markets roiled by fears over the credit squeeze. But Japan and South Korea managed to eke out gains after weaving in and out of negative territory throughout the day.
The Bank of Japan injected 600 billion yen (US$5.07 billion) into the banking system. This is the second straight day the BOJ has added money to stabilize the country's financial markets. The Reserve Bank of Australia injected A$1.52 billion (US$1.28 billion) into financial markets early into the session through repurchase agreements. The cash injection is relatively modest and indicates possibly easing concerns at RBA about global liquidity squeeze impacting Australia.
Other central banks including South Korea's have also pledged to follow suit if needed.
The yen edged up as global stock markets steadied from their slide. The yen has been on the rise as investors unwind carry trades funded by the low-yielding unit. In a carry trade, investors borrow low-interest rate currencies such as the yen, to buy riskier but higher yielding assets.
Tokyo's Nikkei 225 average closed slightly higher as investors, reassured by central bank moves to inject funds into the banking system, bought recently battered stocks, but falls in bank shares helped the broader TOPIX end at its lowest close this year. Shares of NEC Electronics jumped after a report that it aims to double its sales in China, while energy-related stocks gained ground after commodity prices rebounded.
Investors largely ignored Japanese gross domestic product data out before the start of trade as the focus remained on overseas markets.
South Korea's KOSPI ended higher, recovering from five-week lows, led by exporters such as Samsung Electronics after central banks, including South Korea's, stood ready to implement measures to avert a potential credit squeeze. But plenty of hesitancy remained in a KOSPI that in the previous session saw its biggest drop in over three years amid worries that a U.S. subprime mortgage crisis would tighten credit and leave some funds exposed to soured investments.
Australia's S&P/ASX 200 Index finished 1.15% higher, led by gains in BHP Billiton and
financial firms, as moves by central banks to inject funds into money markets eased worries about a global credit squeeze.
China's Shanghai Composite Index was up 1.5%, boosted to a fresh record high by large-caps such as Industrial & Commercial Bank of China, after a positive commentary on the market by Xinhua news agency. In a piece run on the front pages of official business newspapers, Xinhua said the market was developing in a healthy and stable manner and in line with the economy. The commentary was taken as a signal that authorities were pleased by the market's bull run, which has pushed up the index 81% so far this year, and were unlikely to take further major action to cool trading any time soon.
Hong Kong stocks were up slightly, as gains led by property plays such as Sun Hung Kai Properties were erased by a slump in HSBC and as global credit fears sparked by U.S. subprime woes persisted.
Singapore's Straits Times Index reversed early gains to remain flat as shares in People's Food Holdings, a China-based producer of fresh and processed meat, fell as much as 11.7% to a five-month low of S$1.36 after the firm posted a 68% drop in quarterly profits.