Financial stocks were strong a day after hedge fund manager John Paulson disclosed that he had bought large stakes in several banks, including Bank of America Corp .
Shares of Wal-Mart Stores Inc , the world's largest retailer, were up 2.4 percent to $51.71, following its second-quarter earnings and its outlook for the full year.
The retail sector, however, was largely lower after the U.S. Commerce Department reported total retail sales fell 0.1 percent in July, substantially below the market expectation of a 0.7 percent gain.
The market was primed for a good day, said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Virginia. And then the hopes were temporarily squashed by worse-than-expected consumer news.
That has turned what could have been an outstanding rally into a mixed, mediocre day, he said.
News that France and Germany, the euro zone's two biggest economies, had a return to growth in the second quarter also buoyed positive sentiment.
The (sectors) which are up, like energy, industrials and information technology, all have decent global exposure, said Gayle.
Stocks briefly extended gains at midday after a 30-year U.S. Treasury bond auction was well received, providing a boost to confidence in U.S. assets including stocks.
The Dow Jones industrial average <.DJI> was up 16.70 points, or 0.18 percent, at 9,378.31. The Standard & Poor's 500 Index <.SPX> rose 4.31 points, or 0.43 percent, at 1,010.12. The Nasdaq Composite Index <.IXIC> climbed 8.57 points, or 0.43 percent, at 2,007.29.
In company news, shares of Kohl's Corp fell 1.05 percent to $51.72 after the department store operator reported a quarterly outlook that was below Wall Street's forecasts. The S&P consumer discretionary sector index <.GSPD> was down 0.33 percent.
Financial shares were broadly higher, with the S&P financial index <.GSPF> up 1.5 percent a day after hedge fund manager Paulson, who made a fortune betting against financial companies after foreseeing the credit crisis, disclosed investments in banks.
Paulson said he bought 168 million shares of Bank of America in the second quarter, making him its fourth largest shareholder. Bank of America's shares rose 5 percent to $16.73.
Paulson also said in a regulatory filing that he holds 35 million shares of Regions Financial Corp , making him the second largest shareholder in the Southeast bank. Regions' shares gained 8.5 percent to $5.23.
Homebuilder shares fell on a string of downgrades, with D.R. Horton Inc down 4.2 percent to $12.88 after Citigroup cut its rating to sell and cut its share price target.
KB Home also fell 2.2 percent to $17.87 after a downgrade by Raymond James.
Earlier in the day, the U.S. Labor Department reported a rise in the number of workers filing new claims for jobless benefits.
The S&P 500 index is now up 49 percent from its roughly 12-year closing low set on March 9.
(Editing by Leslie Adler)