Stocks turned mixed a day after a steep selloff, although energy and materials sectors were lifted by a positive report on commodities prices by Goldman Sachs.
The Dow Jones Industrial Average fell less than 10 points after falling 130 points on Thursday after a weekend downgrade of Italy's outlook and concerns over Greek debt restructuring.
A bullish report on oil prices pushed up energy stocks as Chevron and Exxon Mobil were among stocks leading the Dow higher.
TheS&P 500 rose, while the Nasdaq fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18.
Among key S&P sectors, energy and materials gained, while industrials slipped.
The market is struggling to overcome weak economic news, including several regional reports of weak manufacturing activity, and questions over what will happen when the Federal Reserve stops purchasing long-term bonds, a stimulus program known as quantitative easing, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
"The markets are backing off in part because they are concerned whether assets will move higher in absence of Fed buying," McCain said. "If equity prices correct enough, we may find that once we get past June we see a renewed enthusiasm over the next month or so."
That will depend too on how much improvement investors see in the economy, which McCain sees as possible if energy prices continue to trade at lower levels.
Oil prices gainedafter Goldman Sachs said demand for crude would rise. U.S. light, sweet crude rose 2 percent to more than $112 a barrel, while in London, Brentcrude rose 1.5 percent to more than $99.
Goldman said Brent would rise to $130 a barrel in 12 months and also said it expected copper and zinc to rise.
El Paso soared after news the energy firm would split into two companies, one focusing on exploration and production and a second on the pipeline business. The company also raised its earnings outlook for the year.
Russian internet search firm Yandexlaunched a $1.3 billion initial public offeringon the Nasdaq Tuesday. Shares began trading at $61 a share, and then fell back to about $40 a share, still well above the offering price of $25 a share.
The IPO comes just days after LinkedIn received an explosion of interest in its IPO. Shares of the social networking firm for professionals, meanwhile, traded flat to slightly higher on Tuesday despite being the first day traders were allowed to make a bet the stock price would fall by "shorting" it.
Several less high profile IPOs are expected this week. Among them are Freescale Semiconductor Holdings, which will offer 43.5 billion shares at $22 to $24 a share and Lone Pine Resources, which will offer 15 million shares at $18 to $20 a share. On Thursday, Solazyme will offer 10 million shares at $15 to $17 a share.
The financial sector was lower as American International Group got set to price a 300 million share secondary offering after the market closed. AIG fell ahead of pricing, which is expected to raise about $9 billion. The U.S. Treasury will be selling 200 million shares of its 92 percent stake in AIG, while AIG is selling the rest.
The Federal Deposit Insurance Corp. reported thatthe number of banks at risk of failinggrew in the first quarter, although the FDIC reported only four banks were added to its confidential "problem" list.
Deere gained slightly after raising its quarterly dividend by 17 percent to 41 cents a share from 35 cents. The move comes after the maker of construction, mining and farm equipment released strong second quarter earnings and an upbeat forecast.
And Medtronic fell after a disappointing earnings reportas sales slowed for its implantable heart defibrillators.
Sony gained after news its operating profits would be the same as last year's despite the devastating earthquake and tsunami in Japan in March.
Shares of J.M. Smucker gained modestly after news the owner of Folgers would raise its prices for coffee by 11 percent in response to rising coffee prices.
On the economic front, new home sales rose 7.3 percent in April to a seasonally adjusted annual rate of 323,000, from a 8.3 percent gain in March, the Commerce Department report. Economists surveyed by Reuters had expected new home sales to be be unchanged at the previously reported annual rate of 300,000 units.
But the Richmond Fed's index of business index came in at only 9 in May, falling from 28 in April. It was the third regional survey to show a decline.
On Tap This Week:
TUESDAY: Two-year Treasury note auction.
WEDNESDAY: Mortgage applications, durable goods orders, oil inventories, five-year Treasury note auction; Minneapolis Fed President Narayana Kocherlakota speaks; USDA Food Prices Outlook, BlackRock shareholder meeting, ExxonMobil shareholder meeting, Yahoo investor day; earnings before-the-bell from Costco and Polo Ralph Lauren.
THURSDAY: GDP, USDA Agricultural Trade Outlook, jobless claims, corporate profits, natural gas inventories, seven-year Treasury note auction, money supply; earnings before-the-bell from Sony and Tiffany.
FRIDAY: Personal income and spending, consumer sentiment, and pending home sales.
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