Stocks closed mixed after a session of lackluster trading, although the S&P 500 and the Nasdaq hit new two-year highs on thin gains amid a lack of economic news.
The Dow Jones Industrial Average fell 13.78 points, or 0.1 percent, to close at 11,478.13, as the market struggled to hold on to December gains.
Alcoa, 3M, and Pfizer advanced, while American Express and Boeing fell.
The S&P 500 rose 3.17 points, or 0.25 percent, to close at 1,247.08, its highest closing value for since September 19, 2008.
Nasdaq gained 6.59 points, or 0.25 percent, to close at 2,649.56, its highest closing value since December 31, 2007.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 16.
While the Dow has fallen the last two trading sessions, it's up about 4.3 percent for the month and 10.1 percent for the year-to-date. For the month, the S&P 500 rose 5.6 percent, while it was up 11.8 percent for the year-to-date. The Nasdaq was up 6.1 percent for December, and 16.8 percent for the year-to-date.
Among key S&P 500 sectors, energy, consumer discretionary and telecom rose, while consumer staples fell.
The dollar gained slightly against a basket of foreign currencies as the euro struggled against the Swiss Franc amid continuing euro zone debt concerns. Gold remained a strong safe-havenalternative Monday, gaining nearly $7 to close at $1,385.50 an ounce, amid tensions in Korea and concerns about Europe.
Monday's market weakness likely reflected a bit of nervousness heading into the new year, as investors waited for important economic news coming out later this week, including Gross Domestic Product and existing homes sales on Wednesday, Doug Roberts, chief investment strategist at ChannelCapitalResearch.com told CNBC.com.
But Roberts expects stocks will continue to rise as investors seek to put money that had been on the sidelines or in bonds to work, and as the Federal Reserve continues to fuel the economy through bond purchases. The caveat, he said, is an unexpected jolt from outside the U.S., say, from a European bank, or actions by China, could rattle domestic markets.
"I'm bullish, but it’ll be volatile, and we’re still very vulnerable," Roberts said.
Meanwhile, TrimTabs Investment Research remains "cautiously bullish," saying stock prices will move higher over the intermediate term. The caution stems from two factors: companies and corporate insiders have been net sellers of shares; and investor sentiment "has become exuberant, which suggests the market's gains could be modest," TrimTabs said.
Corporate insiders sold $10.6 billion in November, and $10.7 billion so far in December, levels that have not been seen since the stock market highs of late 2007, the research firm said.
Energy shares were up slightly as oil prices closed above $88 a barrel. Meanwhile, Bank of America Merrill Lynch forecasted oil could rise to $118 to $120 a barrel.
Conoco Philips , Marathon Oil and Valero all gained.
Chesapeake Energy advanced more than 5 percent after news Carl Icahn has built a 5.8 percent stake in the natural gas producer. In a Securities and Exchange Commission filing, Icahn said the shares were undervalued.
Coal mining stocks, meanwhile, rose after FBR Capital Markets raised Consol Energy , Cloud Peak Energy and Patriot Coal to "outperform" from "market perform," citing rising demand. FBR also raised Halliburton to "outperform" from "market perform," saying it expected the oil services firm to gain market share.
In corporate news, AT&T shares fell slightly after news the telecom giant plans to buy acquire wireless spectrum licenses from Qualcomm for $1.9 billion to boost its high-speed, next-generation "4G" network.
Raytheon plans to acquire Applied Signal Technology , a move that will allow the defense contractor to expand its intelligence products. Applied Signal makes communication interception gear.
Sara Lee slipped after news over the weekend that the food maker has is been discussing a sale with Brazilian meat producer JBS, but the companies haven't been able to reach an agreement.
American Express sank more than 4 percent after Stifel Nicolaus downgraded the financial services company to "hold" from "buy," citing the effects of proposed limits to debit-card interchange fees. But KBW raised its price target on AmEx to $60 a share from $56 (Watch FastMoney for Why Stifel Downgraded AmEx).
But KBW cut Visa's price target to $98 a share from $100, in the wake of the debit-card proposal.
Meanwhile, KBW raised its price target for Capital One Financial to $47 a share from $45.
Boeing sank despite news the aircraft maker plans to boost production of 777 airplanes as investors focused on a report that delivery of the 787 Dreamliner be delayed at least six months more.
Medtronic shares rose after news CEO William Hawkins will retire in April or until a successor is found.
In tech news, NetApp shares jumped after news Stifel Nicolaus raised the data management company's shares to "buy" from "hold."
And Research in Motion slipped despite Nomura raising the Blackberry maker's price target to $65 from $60 a share, and Raymond James raising its price target to $77 from $75 a share.
Fiserv shares slid after Baird cut its rating on the electronic commerce systems company to "neutral" from "outperform," citing
Sony said it expected to miss its sales target of 25 million LCD TVs for the year to March 2011 Sunday.
Retail apparel stores were mostly lower Monday despite a strong holiday sales weekend,although consumer stocks have had a strong run lately.
Abercrombie & Fitch ,Limited and J Crew slumped, while Urban Outfitters rose.
Amazon , however, gained as online sales soared 12 percentfrom a year ago. Barclays, meanwhile, raised its price target for Amazon to $195 a share from $180.
On the earnings front, Jefferies Group fell after reporting better-than-expected earnings in the fiscal fourth quarter, and declaring a quarterly dividend of $0.075 a share.
Adobe Systems and Darden Restaurants will report earnings after the closing bell.
Volume on the consolidated tape of the New York Stock Exchange was 3.5 billion shares, while on the NYSE floor, 830 million shares changed hands. Advances and declines were 1 to 1.
And the Senate is set to vote Tuesday on the government spending bill. Senate Majority Leader Harry Reid said a compromise had been reached among Senate leaders ahead of the vote.
European shares closed at a 27-month high,led by mining companies. Nervousness surrounding the region's debt situation remained, with the European Central Bank expressing "serious concerns" because of the Irish bailout. Meanwhile, the ECB's Jean-Claude Trichet said countries must do more to individually tackle the crisis.
Airline stocks, such as British Airways and Air France, were down as many Western European airports were all but closed by snow and freezing cold weather.
Asian stocks closed mostly lower as tensions between North and South Korea re-emerged following live firing drills carried out by South Korea in a disputed area. North Korea, however, said it would not respond to the "reckless" military drills.
On the Calendar This Week:
MONDAY: Earnings from Adobe Systems.
TUESDAY: FCC votes on net neutrality; earnings from ConAgra and Nike.
WEDNESDAY: MBA mortgage applications, GDP, existing home sales, oil inventories; before-the-ell earnings from Walgreen; after-the-bell earnings from Bed, Bath & Beyond.
THURSDAY: NYSE early close; durable goods orders, personal income and spending, weekly jobless claims, consumer sentiment, new home sales.
FRIDAY: Markets closed for Christmas.
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