Stocks rose on Tuesday as the broader market bet that the worst of the credit squeeze was behind it, and the of takeovers increased.
Financial shares climbed to the highest since July after Commerce Bancorp Inc. agreed to be bought by Canada's Toronto-Dominion Bank while U.S bank Citigroup Inc. announced it will purchase the reset of Japan's Nikko Cordial Corp.
The housing sector also rose, led by Pulte Homes Inc. and KB Home despite more weak fundamentals as optimism that banks are working out losses from the credit market's turmoil drove banking stocks higher.
The Dow Jones industrial average was down 40.24 points, or 0.29 percent, to end at 14,047.31. The Standard & Poor's 500 Index was down 0.41 of a point, or 0.03 percent, at 1,546.63.
A drop in oil prices dominated the session as the dollar strengthened, pressuring shares of energy companies. Exxon Mobil Corp. and Chevron Corp. were the biggest drags on the S&P 500, as the biggest U.S. oil company, declined $1.71 to $92.24. Chevron, the second largest, slipped $1.88 to $92.56.
Palm Inc. slumped 55 cents to $15.45. The maker of the Treo e-mail phone posted its first loss in more than three years, and forecast fiscal second-quarter profit excluding some items that missed analysts' estimates.
Biogen Idec Inc., the world's biggest maker of multiple sclerosis drugs, lost $2.28, or 3.4 percent, to $65.66, the most in more than seven months.
In all, the Nasdaq Composite Index was up 6.12 points, or 0.22 percent, to close at 2,747.11.