Stocks erased most of their earlier losses in the final half-hour of trading Tuesday as materials and consumer discretionary stocks advanced.
The move came despite fears that Europe's banking problems and North Korea's threats of military action against South Korea could derail the economic recovery.
The Dow Jones Industrial Average fell almost 20 points, clawing back throughout the day after shedding nearly 300 points at the open.
The S&P 500turned positive and the Nasdaqalso recovered most of its losses after falling more than 2 percent. The CBOEVolatility Index fell near 35 after lingering near 40 for most of the trading day.
The biggest losers on the blue-chip average were Kraft , and Coca-Cola .
But Home Depot, Intel and JPMorgan turned positive in late trading.
The Dow fell as much as 292 points within the first 15 minutes of trading, but losses steadied after coinciding with an NBC report that North Korean troops were not on military alertdespite tensions with the South.
The SPDR Financial exchange-traded fund was off 3 percent earlier, but halved its losses as markets calmed through the day. Goldman Sachs shares rose as investors grew more comfortable with the Wall Street giant's fate amid congressional financial reform. Morgan Stanley also gained.
The dollar neared a 4-year highagainst the eur and oil prices shed more than $1 a barrel to settle below $69.
Meanwhile, gold notched modest gains, settling near $1,200 an ounce. The SPDR Gold Trust ETF, which closely tracks the metal's movements, moved higher, as did other gold-related stocks including Anglogold Ashanti and Barrick Gold . Gold mining and precious metals were the among the only positives of the Dow Jones sectors.
Treasurys rose after a weak auction of two-year notes. The $42 billion sale fetched a high yield of 0.769 percent and the bid-to-cover ratio was 2.93.
Auctions of 5-year and 7-year notes are expected in the next two days, respectively.
In today's economic news: A report showing that housing prices fell in Marchdespite hopes that the government tax credit would help lift the market didn't help the market's mood.
On a positive note, U.S. consumer confidence rose for the third straight monthin May to the highest in more than two years as concerns about the labor market continued to ease.
And on the tech front, Microsoft sharesfell amid the tech giant's plans to overhaul managementof its division focused on mobile phones, videogames and other consumer devices, according to the Wall Street Journal.
Yahoo and Nokia are planning to team up to boost their mobile Internet offerings, in an attempt to compete against rivals such as Apple and Google .Starting in the second half of this year, Yahoo will host Nokia's email on phones exclusively and Nokia in turn will provide maps and navigation for Yahoo.
AutoZone was one of the S&P 500 leaders after company reported earnings before the bellthat were better than estimates.
Meanwhile, Walmart announced it is cutting the price of the Apple's iPhone 3GS to $97 with a two-year contract from $197, another possible sign that Apple is getting ready to unveil a new model.
Shares of Genzyme jumped more than 5 percent to lead the S&P 500 after the FDA approved the drugmaker's new treatment for late-onset Pompe disease.
Meanwhile, Medtronic slid despite reporting earnings that beat expectations.
And shoe retailer DSW climbed after reporting earnings that easily topped consensus.
Still to Come:
WEDNESDAY: Yahoo Investor Conference; FINRA annual conference; weekly mortgage apps; durable goods; new home sales; weekly crude inventories; 5-year note auction; Fed's Lacker speaks
THURSDAY: J&J recall hearings; 2nd look at Q1 GDP; corporate profits; weekly jobless claims; 7-year note auction; Fed's Lacker speaks; earnings from Costco and Tiffany
FRIDAY: Toyota hearings; Apple expands iPad sales to 9 more countries; personal income, spending; Chicago PMI; consumer sentiment
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