U.S. stocks on Monday managed to end mildly up for a second session as unease over escalating unrest in Iraq curbed enthusiasm over upbeat economic reports and activity on the corporate deal-making front.
"The good news is the economic backdrop continues to be positive, so that mitigates some of the headlines and uncertainties coming out of the Middle East, at least for today," said Jim Dunigan, managing executive, investments at PNC Wealth Management.
Monday's economic data had the New York Federal Reserve's Empire State index of business conditions in June rising to its best reading since June 2010; industrial production for May up 0.6 percent and a gauge of builder sentiment jumping in June.
The Iraqi government is trying to fend off Sunni Islamist insurgents who took control of the north of the nation during the past week, with U.S. Secretary of State John Kerry saying in an interview with Yahoo! News that the White House is willing to talk to Iran over the deteriorating security conditions in Iraq.
"There are no easy answers there; the market will wait to see if it's going to get more volatile and require some action by the U.S.; if we get drawn in in some way, that's going to continue to cause concern," Dunigan said.
Oil prices trimmed an early rise after Bank of America called "highly unlikely" the utter halt of Iraqi production of crude, with output concentrated in the southern side of Iraq.
U.S. dependence on crude from the Middle East is "thankfully a lot less of an issue than a couple of years ago, before advances in oil and gas production domestically. Prices may not reflect that, but our dependence is less," noted Dunigan.
Investors also monitored geopolitical unease in Ukraine after Russian natural gas exporter Gazprom reduced supplies to Ukraine after the Ukrainian government did not meet a deadline to pay its gas debts in discord that could hinder gas exports to Europe.
After a 20-point gain and 52-point fall, the Dow Jones Industrial Average ended 5.27 points ahead at 16,781.01.
The added nearly 2 points to 1,937.78, with utilities rising the most and financials hardest hit among its 10 sectors.
The Nasdaq rose 10.45 points, or nearly 0.2 percent, to 4,321.11.
The CBOE Volatility Index, a measure of investor uncertainty, rose 3.9 percent to 12.65.
The volatility index might be expected to "stay firm even if the averages bounce as the Iraq situation is an overhang and the Fed's two-day meeting starts tomorrow," Elliot Spar, market strategist at Stifel, Nicolaus & Company, wrote in an afternoon note.
The Federal Open Market Committee meets Tuesday and Wednesday, with the FOMC expected to reduce its growth forecast for 2014 in light of the negative 1 percent first-quarter GDP.
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Advancers stepped just ahead of decliners on the New York Stock Exchange, where nearly 604 million shares traded. Composite volume topped 2.9 billion.
Fluctuating after a recent spike, crude futures for July delivery fell by a cent to $106.90 a barrel.
Corporate deals had Medtronic agreeing to purchase Dublin-based Covidien for $42.9 billion in a move that will have the maker of medical devices moving its headquarters to Ireland and reducing its tax rates.
Another deal had Chipmaker SanDisk saying it would buy flash storage device maker Fusion-io for $1.1 billion.
And, Level 3 Communications said it would acquire internet services provider TW Telecom for $5.6 billion as the telecommunications services company expands its commercial fiber network in the United States.
"It's a pretty slow start, just a focus on the M&A and the no-news on Iraq, so to speak. There wasn't too much movement over the weekend, and the economic data isn't particularly A-list. Crude is flat but at elevated levels," said Dan Greenhaus, chief global strategist at BTIG.
The International Monetary Fund cut its growth outlook for the U.S. economy and said the Federal Reserve could hold interest rates at zero for longer than investors anticipated.
"One data point alone would not move the market. We'd need a series of data points to form an updated view of the housing market," said Greenhaus.
On Friday, stocks stepped modestly higher, with the Dow and S&P 500 posting their first weekly loss in four.
—By CNBC's Kate Gibson
Coming Up This Week:
FOMC meeting begins
8:30 a.m.: CPI
8:30 a.m.: Housing starts
8:30 a.m.: Building permits
7:00 a.m.: Mortgage applications
8:30 a.m.: Current account Q1
2:00 p.m.: FOMC statement and projections
2:30 p.m. Fed Chair Janet Yellen press briefing
Earnings: Oracle, Blackberry
8:30 a.m.: Initial claims
10:00 a.m.: Philadelphia Fed survey
10:00 a.m.: Leading indicators
Earnings: Darden Restaurants
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