The Nasdaq gained on Monday after positive broker comments lifted large-cap technology shares, though sustained worries about Europe's banking system restrained the Dow and the S&P 500.
U.S. stocks opened lower, with the Dow at one point losing 1 percent, but the market recouped most of the morning's losses by midday.
Tech stocks were led higher by Apple Inc , up 3.2percent at $250.01 after Morgan Stanley raised its price target on the stock by $35 to $310 and added the company to its Best Ideas list.
Stocks have corrected sharply in recent weeks on fears of possible sovereign debt default in Europe. This past weekend, the Bank of Spain took over a small savings bank, CajaSur, a reminder that the difficulties have not receded.
Bank of America Corp fell 1.1 percent to $15.81 while JPMorgan Chase & Co slid 1.1 percent to $39.61.
We're in uncharted waters in terms of what's happening in Europe, and the market is going to remain volatile as traders try and interpret what's going on, said Eric Kuby, chief investment officer of North Star Investment Management Corp in Chicago.
Citigroup bucked the trend in banks, gaining 3.7 percent to $3.89 after Goldman upgraded the bank to buy from neutral. Goldman also cut Wells Fargo & Co to neutral from buy, sending the stock down 3 percent to $29.19.
The Dow Jones industrial average <.DJI> was down 13.91 points, or 0.14 percent, at 10,179.48. The Standard & Poor's 500 Index <.SPX> was up just 0.38 of a point, or 0.03 percent, at 1,088.07. The Nasdaq Composite Index <.IXIC> was up 13.05 points, or 0.59 percent, at 2,242.09.
At midday, the market's breadth was positive, with advancers outnumbering decliners on the New York Stock Exchange by a ratio of 3 to 2, while on the Nasdaq, about seven stocks rose for every six that fell.
In deal news, International Business Machines Corp plans to buy Sterling Commerce from AT&T Inc for about $1.4 billion in cash, while Gentiva Health Services agreed to buy Odyssey HealthCare Inc for about $1 billion.
Odyssey climbed 37.3 percent to $26.48 while Gentiva shot up 14.4 percent to $29.50.
In contrast, IBM's stock slipped 0.2 percent at $125.19 and AT&T lost 1 percent to $24.60. Both IBM and AT&T are Dow components.
Campbell Soup Co posted a better-than-expected profit on higher sales in its key U.S. soup market and forecast full-year earnings at the high end of its target, but the stock shed 0.2 percent to $35.40.
On the economic front, sales of previously owned U.S. homes rose to a five-month high in April as buyers rushed to close on contracts before a federal home buyer tax credit expired. But the supply of homes on the market hit a nine-month high.
The Dow Jones U.S. Home Construction Index <.DJUSHB> was up 0.2 percent at 276.00.
(Editing by Jan Paschal)