Stocks were mostly flat in a thinly traded session on Tuesday as investors digested gains accrued last week, the best week for equities in two years, while strength in Netflix helped lift the Nasdaq.

Equities rallied for five straight days to push the S&P 500 up 5.6 percent, rebounding from weakness over the past two months. But with questions persisting over the strength of economic growth the U.S. debt ceiling, the summer could be a rough one.

It's no real surprise that the market is having a harder time today getting excited, given the big week we just had, said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management, which oversees about $50.6 billion.

The day's volume was light, a trend that was also seen as enduring. The anemic action could exacerbate stocks' gyrations in the holiday-shortened week, especially with Friday's non-farm payrolls report looming large on the horizon. The payrolls data is expected to show tepid job creation in June. Markets were closed on Monday for the U.S. Independence Daholiday.

Markets are in a highly volatile state right now, making this a difficult market to make a lot of progress in, Miller said. We're going to go back and forth with strong weeks like last week and weak ones like what we had before that.

The Dow Jones industrial average <.DJI> was down 13.96 points, or 0.11 percent, at 12,568.81. The Standard & Poor's 500 Index <.SPX> was down 1.90 points, or 0.14 percent, at 1,337.77. The Nasdaq Composite Index <.IXIC> was up 7.20 points, or 0.26 percent, at 2,823.23.

Last week, moves to avert a debt crisis in Europe and surprisingly strong regional business data helped lift some of the gloom on Wall Street.

The Nasdaq was lifted by Netflix Inc , which surged 7.7 percent to $288.52 after it said it was expanding its online video service to 43 countries in Latin America and the Caribbean.

New orders received by U.S. factories bounced back in May, boosted by demand for transportation equipment, a government report showed. The 0.8 percent rise was slightly below economists' forecast.

Stocks were little impacted by the data following last week's move and some traders may be betting that the S&P's rally is near an end.

A substantial August put spread was transacted in the S&P 500 Index <.SPX> on Tuesday and was followed by the purchase of a hefty August $120-$127 put spread on the SPDR S&P 500 Trust , said Frederic Ruffy, options strategist.

Morgan Stanley's U.S. equity strategist, Adam Parker, said lower growth and inflation worries are set to drive the S&P 500 price-to-earnings ratio toward 10 within five years as anxious investors keep a lid on stock prices.

During the recent sell-off, the P/E ratio, or what investors are willing to pay for a dollar of earnings, fell to 12.7 from 13.5, according to Morgan Stanley's data. The note was dated July 4.

U.S. crude oil futures surged 2.4 percent to $97.23 a barrel after Barclays Capital raised its forecast for the commodity in 2012, lifting the S&P energy index <.GSPE> up 0.7 percent. Marathon Oil rose 3.5 percent to $34.15.

In company news, Southern Union Co advanced 2.6 percent to $41.40 after pipeline operator Energy Transfer Equity LP raised its bid to buy its rival by 21 percent to about $5 billion, trumping the $4.9 billion bid offer from Williams Companies Inc .

Immucor Inc surged 30.3 percent to $27 after the diagnostics firm said it agreed to be acquired by private equity group TPG Capital for a fully diluted equity value of $1.97 billion.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)