Apple is also targeting a launch for the next-generation iPhone 5 in late September, according to sources. In addition, Apple suppliers in Asia have started producing a cheaper version of the popular iPhone 4 with a smaller 8-gigabyte flash drive, according to sources.
Microsoft gained after the firm announced it will develop and market cloud-computing products in China with China Standard Software.
Nintendo soared more than 8 percent after news the Japanese video console maker is taking action to shore up lackluster salesof its 3DS player.
Nvidia jumped after Wells Fargo upgraded the chipmaker's stock to "outperform" from "market perform."
Among banks, Goldman Sachs edged higher after CEO Lloyd Blankfein confirmed he had hired Reid Weingarten, a high-profile Washington defense attorney. Investigations continue of Goldman and its role during the financial crisis.
Meanwhile, UBS said it plans to cut 3,500 jobs—almost half of them from its investment bank—in an annual cost-cutting move.
Bank of America was the only decliner on the Dow. The stock hit fresh 52-week lows earlier amid ongoing worries that the bank may need to raise capital to absorb billions in mortgage losses. Former equity research strategist Henry Blodget even said the bank might need up to $200 billion in fresh capital.
Meanwhile, the company spokesperson stated that Blodget's claims are "exaggerated and unwarrented" and that his statement of sovereign exposure is off by a factor of 10, while his commercial real estate figures were off by a factor of 4.
On the earnings front, Heinz slipped even after the ketchup maker beat earnings expectations, helped by growth in emerging markets. Meanwhile, Medtronic gained after the medical device maker posted earnings that matched analyst expectations.
PharMerica skyrocketed almost 30 percent after rival Omnicare announced it may acquire the pharmacy services company.
Gold prices retreated from its record high of $1,911 an ounce, but the precious metal is still on track for its biggest one-month gain since Sept. 1999.
Treasury prices slippedeven after the government auctioned $35 billion in two-year notes at a high yield of 0.222 percent and a bid-to-cover of 3.44.
Volume was slightly above average with the consolidated tape of the NYSE at 5.02 billion shares, while 1.25 billion shares changed hands on the floor.
Investors shrugged off news that new home sales dipped in July, to a five month low, according to the Commerce Department. And adding to the negative economic news, the Richmond Federal Reserve said its index of factory activity slumped in July amid slower growth in new orders and shipments.
European shares closed slightly higherwith stocks showing some signs of stability.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
Coming Up This Week:
WEDNESDAY: Weekly mortgage apps, durable goods orders, oil inventories, 5-yr note auction; Earnings from Toll Brothers, Applied Materials, TiVo
THURSDAY: Weekly jobless claims, 7-yr note auction, Medtronic shareholders mtg, USDA food prices outlook; Earnings from Hormel, Pandora
FRIDAY: GDP, corproate profits, consumer sentiment, Bernanke speaks, short-sale bans expire; Earnings from Tiffany
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