The tech-heavy Nasdaq refused to partake in the turnaround, remaining down more than 1 percent. The Dow Jones Industrial Average and S&P 500 index vacillated between positive and negative territory.
The Nasdaq and S&P struggled in the final hours of trading not to spend a third straight weekend in bear-market territory.
(Has the U.S. recession reached Silicon Valley? Click on the video at left.)
There was some encouraging news from the tech sector: IBMbeat earnings expectations as strong demand overseas for its software and services juiced revenue and Nokia , the world's biggest handset maker, offered an optimistic outlookfor the rest of the year.
Merrill Lynch, which has been among the hardest hit by the credit crunch, reported a $4.9 billion loss -- more than double what analysts had expected and one of the worst in the investment bank's history. Merrill also said it is close to selling $8 billion of assets in a bid to raise fresh capital.
With nearly one-fifth of S&P 500 companies reporting, analysts expect second-quarter earnings for the 500 to drop 17.1 percent, Thomson Reuters reports, down from its prior estimate of 16.1 percent.
Meanwhile, Freddie Mac was rumored to be readying to sell as much as $10 billion in new shares, having taken the first step by registering with the SEC.
Freddie and Fannie Mae have enjoyed a wild rally this week, which, if it holds, would snap an eight-week losing streak. The government on Sunday launched a rescue plan of the pair, assuring investors they would buy back stock if necessary and promising to raise the limit on government guarantees on their debt.
Together, Fannie and Freddie finance about half of U.S. homes, making their stability essential to stabilizing the housing market.
As consumers get pummeled by housing crisis and soaring prices at the pump, a survey by Reuters and the University of Michigan offered a striking revelation: More than half of consumers polled said they plan to accelerate paying off their debtand save more in the year ahead.
The numbers are backing that up: A government gauge of aggregate savings jumped to 5 percent in May, the biggest since March 1995, and the Fed's measure of household indebtedness versus income dropped to 14.13 in the first quarter, the lowest in two years.
It's a solid sign that individuals are getting their house in order but with consumers accounting for two-thirds of economic activity, it means a deepening slump for the economy in the second half of the year and in early 2009.
General Motors shares rose more than 1 percent as oil prices receded.
Light, sweet crude finished the week at $128.88 a barrel , down more than $16, or 11%, from last Friday's close of $145.08 a barrel. That day, oil hit an intraday high of $147.27 a barrel. This week's decline snapped a three straight weeks of gains.
Honeywell's second quarter profit rose 18 percent and the company, which makes everything from air purifiers to cockpit electronics, raised its forecast, citing strong demand for aircraft electronics and environment and security-control systems used in large buildings.
Yahoo shares slipped after Legg Mason, the Internet portal's second largest institutional shareholder, said it will back Yahoo's board, clashing with Carl Icahn and his plan to oust the board and elect a rival slate.
"We believe the current board acted with care and diligence when evaluating Microsoft's offers," Legg Mason said in a statement. The firm's portfolio manager Bill Miller said Icahn would have more support if he promised not to sell Yahoo below $33 a share, and urged Microsoft to make its offer public. "If Yahoo shareholders support it, I am confident the board of Yahoo will accept it," Miller said.
American depositary shares of Teva Pharmaceuticals jumped on news that the Israeli company has agree to buy rival generic drug makerBarr Pharmaceuticals in a deal valued at $7.46 billion.