Stocks closed mixed but finished off their worst levels Tuesday after a report that EU officials may be creating two separate rescue fundsto help contain the region's ongoing sovereign debt crisis.
The Dow Jones Industrial Average added 52.30 points, or 0.43 percent, to finish at 12,150.13 , led by Pfizer and GE .
The S&P 500 eked out a gain of 1.39 points, or 0.11 percent, to end at 1,258.47, failing to finish above the crucial 1,260 level. Meanwhile, the Nasdaq slipped 6.20 points, or 0.23 percent, to close at 2,649.56, snapping a four-day winning streak.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 28.
Most S&P sectors still ended in positive territory, led by materials.
“Without compelling positive news, [the market] is running out of gas…we need some reassurance if not positive surprise to drive us significantly higher,” said Bruce McCain, chief investment strategist at Key Private Bank."
Without any significant economic news, investors continued to focus on developments in the euro zone.
Negotiators are considering allowing the euro zone’s current 400-billion bailout fund to continue running when a new 500 billion euro facility—known as the European Stability Mechanism (ESM)—comes into force in mid-2012, according to a report from the Financial Times.
And in its latest move, Standard & Poor's said it is considering downgrading the EFSF. This comes after S&P placed the ratings of 15 out of 17 euro zone countries on credit watch negative—including those of top-rated Germany and France. The remaining two members, Portugal and Greece, have already had their credit ratings downgraded to junk.
The warnings follow French President Nicolas Sarkozy and German Chancellor Angela Merkel's announcement that they had agreed on a plan for a revised European treatyahead of a crucial EU summit later this week.
Quincy Krosby, market strategist at Prudential Financial expects to see “substantial” progress from the EU summit this week in Brussels.
“The German bond auction was a call to the policymakers that something has got to be done and has to be done quickly,” she explained. “The markets move much more quickly than policymakers.”
However, not all strategists are optimistic about the upcoming summit.
"I simply would not go into these meetings with high expectations," said McCain. "There’s been little indication that [EU leaders] are coming to any significant agreement on the true underlying problems. They continue to look for partial fixes…the best you could hope for is that they make some slow but incremental progress over the meetings."
3M rose after the conglomerate reaffirmed its profit outlook for the current fiscal year and projected a 2012 profit and sales range that brackets current expectations.
Also among Dow components, GE climbed after Bernstein raised its rating on the firm to "outperform" from "market perform" and boosted its price target to $21 from $19.
Among earnings, AutoZone slipped slightly even after the auto parts retailer reported better-than-expected results.
And Toll Brothers also gained after the luxury homebuilder reported sales that topped estimates, while earnings as gross margins beat forecasts.
Darden Restaurants plunged to lead the S&P 500 laggards after the parent company of Olive Garden cut its fiscal 2012 earningsand sales forecast amid rising food costs and failure to lure new customers despite deep discounts. Rivals Cheesecake Factory and PF Chang's also declined.
Among techs, Netflix slipped after Verizon announced plans to launch a service in 2012 that will allow customers to stream movies and TV shows over the Internet outside of markets where it currently offers its broadband and FiOS package.
Meanwhile, Royal Dutch Shell announced a major discovery of shale gas in China, a market which currently has no commercial shale gas production.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
On Tap This Week:
WEDNESDAY: Weekly mortgage applications, quarterly services survey, oil inventories, consumer credit
THURSDAY: BoE announcement, ECB announcement, McDonald's sales report, jobless claims, wholesale trade, AT&T CEO speaks; Earnings from Costco, Smithfield Foods
FRIDAY: International trade, consumer sentiment, Greek short selling ban expires, EU summit
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