U.S. stocks closed higher for a second straight session in light volume trading as investors looked for signs of easing in geopolitical tensions.
Trading across all platforms of the New York Stock Exchange at close was about 400 million short of the 3.1 billion average.
"Besides seasonal factors of low volume, you have to remember that investors are still wanting to see how the economy is shaping up," said Peter Cardillo, chief market economist at Rockwell Global Capital. "Investors are more concerned that the market has not made up its mind on how to handle this monetary policy."
Equities had received a boost from Stanley Fischer, the vice chairman of the U.S. Federal Reserve, who said early on Monday that the recoveries in the U.S. and global economies had been "disappointing" thus far, indicating the Fed may not imminently tighten its monetary policy.
However, ahead of economic data and Fed speeches later this week, analysts said geopolitical developments are a primary indicator for investors.
President Barack Obama is scheduled to address the Iraq situation at 4:45 p.m. ET.
"Relatively uneventful day here," said Dan Greenhaus, chief global strategist at BTIG. "If you're going to get any volatility it's going to come from [overseas]."
But NATO chief Anders Fogh Rasmussen told Reuters that he saw a "high probability" that Russia could intervene militarily and that NATO detected no sign that Moscow was pulling back thousands of troops from close to the Ukrainian border.
Over in Gaza, Israel and the Palestinians agreed on Sunday to an Egyptian proposal for a new 72-hour ceasefire. President Barack Obama said on Saturday that U.S. airstrikes had already destroyed arms that Islamic State militants could have used against Iraqi Kurds. He did warn, however, that there would be no "quick fix" to the crisis.
"The market will handle bad news if it sees it coming," said Dave Lutz, head of ETF trading at Jones Trading. "We have to wonder how much of this is already built in. Not just specifically our market, but looking at the stress the German market has gone through."
Lutz said the market is reversing the losses and protection buying of last week, when the VIX skyrocketed as investors bought options on the S&P 500. Even with headlines from Monday morning headlines on NATO and Ukraine officials warning of a continued Russian presence on the Ukraine border, stocks continued to rise.
"They [the headlines] haven't gotten worse which was clearly a win," he said. "Plus we're past the weekend and you had a lot of angst building up ahead of the weekend." He said the market is also taking the limited air strikes in Iraq as a positive.
As earnings season draws to a close, quarterly reports and economic data for the week will shed light on consumer behavior.
"We'll certainly get a consumers' read on a multitude of geopolitical events," said Art Hogan, chief market strategist at Wunderlich Securities.
But as just 16 S&P 500 firms (less than 4 percent of index market cap) are expected to post results this week, analysts said markets will not move much on the news.
"Earnings are going to have a diminishing effect on the markets in the week ahead," said Nick Raich, CEO of The Earnings Scout.
He expects that lower oil prices and a decline in interest rates will lead to better forecasts for retailers, although earlier reports from other firms have likely already set the tone for stocks.
Over 85 percent of S&P 500 firms have now reported their second-quarter results. So far, the earnings-per-share (EPS) beat:miss ratio is running at a pretty solid rate of around 3:1, according to Deutsche Bank. The ratio is lower for sales revenue, with just short of two-thirds of firms exceeding consensus estimates.
The Dow Jones Industrial Average pared earlier gains of more than 60 points to close just 16.05 points higher, or 0.10 percent, at 16,569.98. Intel and Caterpillar led blue-chip gains, with Wal-Mart among the 12 decliners.
The also shaved earlier gains to rise 5.33 points, or 0.28 percent, to 1,936.92, led by the consumer staples sector, with materials, energy and utilities the greatest laggards. Earlier, all 10 sectors were positive.
After rising more than 1 percent in the morning, the Nasdaq shaved gains to 30.43 points, or 0.70 percent, to 4,401.33, with pharmaceuticals among the top gainers.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held around 14.18 after closing above 15 for each past day of the month.
Three stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of more than 596 million and a composite volume of more than 2.7 billion at market close.
The benchmark 10-year note yield fell to 2.42 percent, but was still higher than last week's low of 2.35 percent.
The U.S. dollar mostly held steady against major currencies.
Gas and oil pipeline operator Kinder Morgan traded at all-time highs on Monday morning after the firm announced it will consolidate its publicly traded units under one roof in a $70 billion deal.
In morning trading, Priceline rallied more than 3 percent on quarterly results that beat analyst estimates but its current quarter earnings forecast fell short of expectations.
Earlier, transports were on pace for their best two-day gain since April 1. Industry firms including JetBlue, Kansas City Southern, Kirby, Delta, and Alaska Air boosted markets as the airlines benefited from lower oil prices.
Other stocks on the radar include PepsiCo, which was upgraded to "buy" from "neutral" at UBS, saying the beverage giant is operating with newfound urgency, and that it expects continued consensus-beating earnings.
The doughnut shop operator Krispy Kreme's stock was upgraded to "outperform" from "neutral" at Wedbush, saying it sees a meaningful improvement in same-store sales.
Pacific Crest Securities downgraded King Digital's stock to "sector perform" from "outperform," pointing to the Candy Crush maker's upcoming lockup expiration and the stock's recent run-up.
The food services provider Aramark beat estimates by six cents with fiscal third quarter profit of 26 cents per share, and also raised its full year forecast above current consensus. The company said it's achieved strong results despite a challenging business environment.
MannKind rose 22 percent to $9.95 after French drugmaker Sanofi signed a worldwide licensing agreement with the company worth up to $925 million. MannKind was the Nasdaq's most active name.
Chiquita Brands International climbed 31 percent to $13.21 in its biggest one-day advance since its 2002 trading debut after juice maker Cutrale and Brazilian investment firm Safra offered to buy the company.
Blackstone shares rose more than 2 percent on Monday after news that the private equity giant is close to striking a deal to buy a 50 percent stake in a Royal Dutch Shell natural gas field in Louisiana, according to media reports.
On tap this week:
7:00 a.m.: NFIB small business survey
10:00 a.m.: JOLTs
1:00 p.m.: 3-year note auction
2:00 p.m.: Budget
7:00 a.m.: Mortgage applications
8:30 a.m.: Retail sales
0905 a.m.: New York Fed President William Dudley
9:20 a.m.: Boston Fed President Eric Rosengren
10:00 a.m.: Business inventories
1:00 p.m.: 10-year note auction
8:30 a.m.: Jobless claims
8:30 a.m.: Import prices
1:00 p.m.: 30-year bond auction
Earnings: Estee Lauder
8:30 a.m.: PPI
8:30 a.m.: Empire manufacturing survey
9:00 a.m.: TIC data
9:15 a.m.: Industrial production
9:15 a.m.: Capacity utilization
9:55 a.m.: University of Michigan consumer sentiment