Stocks erased their losses in the final half-hour of trading Monday as the dollar gave up its gains against the euro after earlier hitting a four-year high.
The Dow Jones Industrial Average rose 5.67, or 0.1 percent, to close at 10,625.83, after being down as much as 100 points earlier. The S&P 500 and Nasdaq also pulled off modest gains. The CBOE volatility index, widely considered the best gauge of fear in the market, slipped to around 31.
The euro was around $1.24 against the dollar, after earlier hitting a four-year lowagainst the U.S. currency.
"What happens late in the trading day is the professionals come in and figure out what to do based on where the market is. And to my eye, the professionals came in and said, 'This market's on sale. And the economy is not going to the wrecker again, and so it's time to buy," Stuart Schweitzer, global markets strategist at JPMorgan Private Bank, said on CNBC.
Jack Ablin, CIO of Harris Private Bank, agrees.
“Employment is still improving,” Ablin said. “The employment picture is going to brighten over the next 3 to 4 months.”
The market had struggled for much of the day as steep slides in commodity prices hit energy and materials, while a weak Empire State manufacturing report put a damper on investor sentiment.
Consumer staples were the day's best performers, with Kraft leading the Dow. Wal-Mart rose ahead of its earnings, due out Tuesday.
Energy, financials and materials were the weakest sectors. Alcoa , Caterpillar and United Technologies were Dow's the biggest decliners.
This comes after a rocky week last week, in which the Dow lost 1.5 percent on Friday but ultimately finished up 2.3 percent for the week.
Economic news was a mixed bag: The New York Fed reported its gauge of regional manufacturing activity fell to 19.11in May from 31.86 in April. The level still indicates growth but was much weaker than the 30 expected. Meanwhile, U.S. home-builder sentiment hit a 2 1/2-year high in May, the National Association of Home Builders reported.
Home Depot rebounded ahead of its earnings, also due out Tuesday.
Home Depot had started the day as the biggest decliner on the Dow after rival Lowe's beat earnings expectations for the quarter but disappointed with it its outlook, saying 2010 will be "a year of transition."
Lowe's was just the latest in a string of companies that beat their earnings targets but issued disappointing outlooks.
Last week, Cisco CEO John Chambers rattled the market. The networking-gear maker beat on both earnings and revenue but Chambers said there is still reason for caution given the weak job market.
Priceline, JC Penney, Kohl's and Nordstrom also delivered weak outlooks last week.
Oilsettled at $70.08 a barrelafter earlier falling below the $70 mark.
Goldheld steadyaround $1,233 an ounce after last week surging above $1,245. One mining executive said the precious metal is headed to $2,000 by year end.
Shares of American Express rose following news that credit-card delinquencies fell for the fourth straight monthin April. But Visa and Capital One rose.
Financials were mixed as the Senate is likely to hold a final voteon the financial-reform bill on either Wednesday or Thursday this week.
Shares of large financials such as Citigroup and Goldman Sachs slipped, while Bank of America rose.
Big M&A day: Private equity firm is in talks to buy Pactiv, which makes Hefty bags, the Wall Street Journal reported. Pactiv shares surged more than 20 percent.
Hospital operator Universal Health Services agreed to buy mental-health-facility operator Psychiatric Solutions for about $2 billion in cash. Astellas Pharma, Japan's No.2 drugmaker, agreed to buy U.S. biotech OSI Pharmaceuticals , which makes the cancer drug Tarceva,
Apple got a boost after a report showed Asian bankers prefer the iPhoneto Research In Motion's BlackBerry for business.
American Superconductor shares jumped after the electrical systems maker said it received a $445 million multi-year contractfrom China’s Sinovel Wind, the world’s third largest wind turbine maker.
BP shares fell as the company struggled to contain the Gulf oil spill. Its latest recovery effort, siphoning oil out of the hole using a mile-long tube, seemed to work.
General Motorsreported a profit for the first quarter and the government is apparently looking for a Wall Street bank to serve as an adviser for a GM IPO, the Wall Street Journal reported.
Volume was slightly above average, with about 1.44 billion shares changing hands on the New York Stock Exchange. But decliners outpaced advancers, roughly 3 to 2.
This Week:
TUESDAY: JPMorgan & Massey Energy shareholders meeting; Fed’s Pianalto speaks; housing starts; PPI, earnings from Home Depot, Wal-Mart & Hewlett-Packard
WEDNESDAY: FOMC minutes; Google developers’ conference; weekly mortgage apps; CPI; weekly crude inventories; earnings from Deere, Target, Applied Materials
THURSDAY: Toyota/NHTSA hearing; BOJ monetary policy meeting; weekly jobless claims; leading indicators; Philadelphia Fed survey; earnings from Computer Sciences, Gamestop, Staples, Dell, Gap
FRIDAY: Earnings from Ann Taylor
More From CNBC.com:
