Stocks that outperform in a weak economy helped buoy the Dow and S&P 500 on Thursday as concerns about faltering growth and inflation prompted investors to seek out less volatile names.
Energy shares also rallied as U.S. crude gained more than 1 percent to trade above $108 a barrel.
The S&P 500 fell almost 1 percent early but found support near 1,300, a level that attracted buying interest in early March.
Stocks have lately sagged as economists have lowered forecasts for U.S. growth. A Reuters poll of economists showed 2011 gross domestic product forecasts fell to 2.9 percent from 3.1 percent.
GDP forecasts are continuing to fall, so (bets on defensives) are a safety trade, said Peter Boockvar, equity strategist at Miller Tabak & Co.
Adding to the bearish sentiment, Google Inc shares fell 5 percent after the bell after the Internet giant posted quarterly results.
The Dow industrials' top percentage gainers during the regular session were Coca-Cola Co , up 1.5 percent, Kraft Foods Inc , up 1.7 percent and Merck & Co , up 1.2 percent.
A Senate investigation of Goldman Sachs hurt the Wall Street giant and some of its peers, while an unexpected rise in jobless claims added to bearish sentiment that kept gains in check.
Goldman shares fell 2.7 percent to $155.79 and were a drag on the S&P financial sector <.GSPF>, which was down 0.9 percent.
Further weighing on financials, major housing lenders agreed late on Wednesday to costly fixes of their foreclosure practices as part of a settlement with U.S. bank regulators that jumped ahead of a states' probe.
The Dow Jones industrial average <.DJI> rose 14.16 points, or 0.12 percent, to 12,285.15. The Standard & Poor's 500 <.SPX> gained 0.11 of a point, or 0.01 percent, to 1,314.52. The Nasdaq Composite <.IXIC> dropped 1.30 points, or 0.05 percent, to 2,760.22.
Adding to the energy sector boost as oil rose, natural gas producer and pipeline company El Paso Corp said it will develop a shale oil field without a partner. El Paso shares jumped 5.5 percent to $18.26 to lead gains in the S&P energy sector <.GSPE>, which rose 0.6 percent.
Oil closed above $108 so all the energy stocks rallied this afternoon, Boockvar said.
Late Wednesday, a report from a Senate subcommittee said Goldman Sachs had sold mortgage-linked derivatives to clients at inflated prices and misrepresented the nature of the deals.
Weighing on the tech sector, Fairchild Semiconductor International Inc shares dropped 4.5 percent to $18.31 as it disappointed investors after it said last month's earthquake that threw Japan's electronics supply chain into disarray has yet to generate new business for the company.
Supervalu Inc forecast fiscal-year earnings above Wall Street's expectations after its quarterly profit fell less than feared. The supermarket operator's shares shot up 16.9 percent to $10.61.
Shares of Arcos Dorados Holdings Inc , a large South American franchisee of fast-food chain McDonald's Corp , jumped 24.7 percent to $21.20 in their stock market debut as investors clamored for exposure to the famous brand in a region with booming consumer spending.
McDonald's, a Dow component, rose 0.2 percent to $77.07.
Ford Motor Co fell 1.1 percent to $14.81 after the company agreed to expand a recall of the best-selling F-150 pickup trucks. U.S. safety regulators said the recall was due to a possible short circuit that could cause airbags to deploy unexpectedly.
On the economic front, a government report showed a surprising jump in U.S. jobless claims, raising some questions among investors about the health of the labor market recovery. Economists said the number could be a one-time occurrence.
The core U.S. Producer Price Index rose faster than expected in March as fuel prices rose strongly, adding to concerns about inflation.
About 6.8 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below last year's estimated daily average of 8.47 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,600 to 1,358, while on the Nasdaq, 1,455 stocks rose and 1,121 fell.
(Reporting by Rodrigo Campos; Editing by Jan Paschal)