Stocks eke out gains, but Syria worries weigh; Microsoft slumps, Noka surges

Stocks closed out a choppy session in the black on the first trading day of September, thanks to a handful of upbeat economic reports, but ongoing worries over Syria kept a lid on gains.

(Read more: After-hours buzz: Bank of America, LinkedIn & more)

"The possible escalation of unrest in Syria adds uncertainty to a short-term investment outlook already muddied by talk of a shift in Fed policy and turmoil in Egypt," wrote Sameer Samana, international strategist at Wells Fargo Advisors. "Along with the Federal Reserve's stated intention to start tapering bond purchases in the near future, this additional headwind may lead markets to tread water in the near-term."

S&P 500

The Dow Jones Industrial Average squeezed out a gain of 23.65 points, to close at 14,833.96, led by United Technologies. Earlier, the Dow component rallied more than 120 points before reversing its gains. Microsoft led the laggards. The blue-chip index swung in a wide 155-point range.

The S&P 500 advanced 6.80 points to end at 1,639.77. And the Nasdaq climbed 22.74 points to finish at 3,612.61.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed below 17.

Among key S&P sectors, consumer discretionary and financials closed higher, while telecoms lagged.

(Read more: As markets fall,investors run ... toward risk?)

"The market got oversold last week and it needs to rally back some, but we won't see any gains as long as we have this overhang of military action," said Keith Bliss, senior vice president at Cuttone & Co.

During a meeting with congressional leaders at the White House, President Barack Obama called for a prompt vote on Capitol Hill and reiterated that the U.S. plan would be limited in scope and not repeat the long wars in Iraq and Afghanistan.

House Speaker John Boehner said he would support Obama's call for military action in Syria and urged his colleagues in Congress to do the same. Stocks came off their initial highs in midday trading following Boehner's remarks.

Nancy Pelosi, Democratic leader in the House of Representatives, said she believes Congress will support a resolution authorizing the use of U.S. military force against Syria.

(Read more: If US bombs Syria,here's how high oil could go)

Meanwhile, a Russian news agency reports that two "ballistic objects" had been launched towards the eastern Mediterranean revived concerns about a U.S.-led strike on Syria. Israel's Ministry of Defense confirmed that Israeli forces and the U.S. Missile Defense Agency had carried out a missile test and said Israel would release further information about the launch soon.

Apple gained after the tech giant issued an official invitation for an event on Sept. 10. Analyst widely expect the company to unveil a new iPhone.

On the M&A front, Verizon announced on Monday it will pay $130 billion to acquire Vodafone's 45-percent stake in their Verizon Wireless joint venture, marking the third-largest deal in corporate history.

Vodafone's CEO told CNBC that he will use the cash earned from the deal to accelerate investment in Vodafone's own wireless networks, and to return $84 billion in cash and shares to shareholders.

(Read more: Vodafone CEO: We will spend cash pile on our networks)

Microsoft said it will buy Nokia's handset business for $7.2 billion. Nokia CEO Stephen Elop, a former Microsoft executive, will rejoin the company and is now seen by some as a candidate to replace retiring CEO Steve Ballmer. Shares of Microsoft dropped to lead the Dow laggards, while Nokia skyrocketed more than 30 percent.

Meanwhile, Time Warner Cable and CBS reached an agreement Monday, ending a month-long blackout, returning the broadcast network's programming to millions of subscribers in Los Angeles, New York and Dallas. CBS rallied nearly 5 percent.

(Read more: Who really won the CBS-Time Warner Cable standoff)

On the economic front, the manufacturing sector grew last month to 55.7 in August, its fastest pace in more than two years, according to the Institute for Supply Management. A reading above 50 indicates expansion in the sector.

And construction spending gained 0.6 percent to an annual rate of $901 billion, according to the Commerce Department, topping expectations for a gain of 0.3 percent.

The Labor Department is expected to release its widely-watched employment report on Friday, ahead of the Fed's September policy-setting meeting. Economists polled by Reuters expect non-farm payrolls to have increased by 180,000 obs last month, up from a gain of 162,000 the month prior.

The Japanese Nikkei led Asian stocks higher, after better-than-expected manufacturing data from Europe and China lifted hopes that a global economic recovery was in progress.

Data out on Monday showed Chinese manufacturing hit a four-month high in August and euro zone factory activity rose at its fastest pace since May 2011. In addition, data revealed that the UK's construction sector expanded at its fastest pace in almost six years in August.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

WEDNESDAY: Mortgage applications, international trade, quarterly services survey, Beige Book, Fed's Kocherlakota speaks, auto sales, Neiman Marcus bids due, Samsung event; Earnings from Dollar General
THURSDAY: Challenger job-cut report, ADP employment report, jobless claims, productivity & costs, Fed's Kocherlakota speaks, factory orders, ISM non-mfg index, natural gas inventories, oil inventories, Fed balance sheet/money supply, chain-store sales, NYC fashion week, G-20 summit, new Yahoo logo
FRIDAY: Fed's Evans speaks, nonfarm payrolls, Fed's George speaks; Earnings from Smithfield Foods, Mattress Firm

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