The major indexes changed course several times during Monday's session, rising in response to Pfizer Inc.'s $68 billion planned acquisition of Wyeth, a deal that reassured investors that mergers could still take place in a recession. And the National Association of Realtors said existing homes rose rather than fell in December, stirring hopes that lower prices and falling interest rates are starting to erase at a glut of homes with "for sale" signs.
But news from big companies weighed on the market. Downbeat comments from Caterpillar Inc. about the health of its business curbed the advance in the Dow industrials. Caterpillar shares dropped more than 8 percent after the maker of heavy equipment said plunging commodity prices left the company "whipsawed" in the fourth quarter. Caterpillar said it would offer buyouts to 25,000 employees in the U.S. and cut executive pay.
Home Depot Inc. also announced big job cuts. The company said it would slash 7,000 jobs and close its smaller Expo chain as it struggles with the weak housing market.
"There's a lot of things for investors to digest in what is a very uncertain market environment, and I think that is why you see some hesitation," said Todd Salamone, senior vice president of research, Schaeffer's Investment Research.
After the close of trading, chip maker Texas Instruments Inc. also announced job cuts — a total of 3,400, with 1,800 coming from layoffs. The company also said its fourth-quarter earnings fell sharply.
Concerns about the banking industry added to the market's uncertainty, and most financial stocks fell. After the closing bell, American Express Co. announced fourth-quarter earnings that missed analysts' estimates by a penny. The company, as expected, reported that its cardholders cut back their spending during the October-December period.
According to preliminary calculations, the Dow Jones industrials rose 38.47,or 0.48 percent, to 8,116.03, after briefly moving into negative territory.
The Standard & Poor's 500 index rose 4.62, or 0.56 percent, to 836.57, and the Nasdaq composite index rose 12.17, or 0.82 percent, to 1,489.46.
The Russell 2000 index of smaller companies rose 5.70, or 1.28 percent, to 450.06.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.27 billion shares.
Another unnerving unknown for the market is the exact form that President Barack Obama's proposed stimulus package will take after it has worked its way through Congress.
Senate committees are scheduled to take up the massive plan Tuesday and the full House is expected to vote on its version of the $825 billion package Wednesday. The plan could include big tax cuts and a massive public works program.
"Right now (the market) is in a holding pattern," said Doug Roberts, chief investment strategist at Channel Capital Research. "They know things aren't going to get any better soon, but want to see what this package is going to look like."
Stocks are coming off a wild week of big ups and downs as companies' financial results weighed on the market. All the major indexes finished last week with losses of more than 2 percent.
Analysts expect volatility in the market to persist through the remainder of earnings season.
"It's almost like a teeter-totter right now," said Alan Lancz, money manager at Alan B. Lancz & Associates. "Earnings season is always treacherous in this kind of global economic environment with all the uncertainty."
Of the companies in the Standard & Poor's 500 index that have reported results in recent weeks, more than half have fallen short of analysts' already reduced estimates. The poor showing has left investors nervous that the economy is in worse shape than feared.