Stocks ended mixed after trading in a narrow range most of the session amid light volume Monday, as investors considered Federal Reserve Chairman Ben Bernanke's comments about additional Fed stimulus and regrouped after strong gains in the market last week.
The Dow Jones Industrial Average fell 19.90 points, or 0.2 percent, to close at 11,362.19, after bobbing in and out of positive territory throughout the session.
The sluggish day came after a significant rise in the markets last week even with a weaker-than-expected nonfarm payrolls report on Friday.
Bank of America , Coca-Cola and Microsoft fell, while Cisco and Pfizer rose.
The S&P 500 slipped 1.59 points, or 0.1 percent, to close at 1,223.12, while the tech-heavy Nasdaq rose 3.46 points, or 0.1 percent, to close at 2,594.92. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Among key S&P 500 sectors, health care, utilities and consumer staples fell, while energy and technology rose.
The dollar rose against a basket of currencies. Gold gained, closing at $1,416 an ounce, amid prospects of continued Fed easing and euro zone worries, as did silver, which traded at a 30-year high.
"Bernanke’s comments highlighted what people already know—that mainly it will take some time for the unemployment rate to come down to more favorable levels," Michael Sheldon, chief market strategist at RDM Financial Group, told CNBC.com.
"The markets are taking a bit of a breather here after a pretty strong gain of 3 percent last week, also following on the heels of a disappointing jobs report on Friday," Sheldon added.
One reason stocks haven't plunged, especially considering Friday's weak jobs report, is a more general sense of optimism among investors. Sheldon noted 49.7 percent of individual investors surveyed by the American Association of Individual Investorswere bullish on stocks last week, up from a reading of 20.7 percent in August.
The next catalyst for the market will likely be a decision on whether to extend the Bush-era tax cuts,as Congress is now considering. Democrats failed to get tax measures passed in the Senate over the weekend for all but families making $250,000 or more.
If the tax rates are extended, that "could provide consumers and businesses a higher level of confidence as we head into the new year," Sheldon said.
The fact "the market bent, but certainly did not break," in the face of consistent stream of negative news — including the European sovereign debt crisis, the likelihood of China raising rates, tensions between the two Koreas, and Friday's jobs report — was one of several signs bullish market conditions persist, Todd Salamone, senior vice president of research at Schaeffer's Investment Research said in note to clients Monday.
Other signs of bullishness included evidence of lower volatility in the future, as measured by a comparison of VIX to the S&P 500's actual volatility, Salamone said. That usually means higher stock prices, he wrote.
Another is the S&P 500 rallied in the week following Black Friday, which historically has led the market to a stronger-than-normal rally for the rest of the year, according to the firm.
Shares of Bank of America slipped after the bank told U.S. regulators it has sold enough assetsto meet the conditions set down in its $45 billion government bailout. BofA was given until the end of the year to generate the funds.
On the tech front, Cisco rose after Oppenheimer raised the networking giant to "outperform" from "perform," saying losses in the company's switching business were already factored into the share price.
Goldman also upgraded Cognizant Technologies to "buy" from "neutral," and raised its price target for the information technology consulting and technology firm to $80 from $71. The brokerage cited a boost in IT spending by financial services companies and growth in offshore sales.
SanDisk slipped after ThinkEquity cut its rating on the flash memory card manufacturer to "hold" from "buy."
AOL could be on the brink of a series of transactions to breakup the Internet content provider, whichcould culminate in a mergerwith Yahoo , Reuters reported, citing sources.