Stocks were mostly lower on Tuesday as cautious investors continued to digest the S&P's recent downgrade warning for the euro zone.
Losses were capped in the volatile session as some hoped the warning would help force budget changes at a European Union summit this week, and the Dow rose on strength in a pair of industrial names.
Rating agency Standard & Poor's said Monday it may cut the sovereign credit rating of 15 euro zone countries. The warning was leaked during market hours, and U.S. stocks halved their session's gains.
Bank stocks, recent outperformers in the U.S. market, kept a lid on gains, with the S&P financial sector <.GSPF> down 0.4 percent. The top-performing sectors were defensive, with health care stocks <.GSPA> and utilities <.GSPU> both up 0.4 percent.
Markets have been pricing in an environment that's less than AAA, and the fact that it has already been incorporated into most investors' thinking is why we're not seeing a bigger sell-off today, said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York.
Still, the timing of a warning like this is never completely expected, added Grohowski, who helps oversee $170 billion.
The Dow Jones industrial average <.DJI> was up 38.60 points, or 0.32 percent, at 12,136.43. The Standard & Poor's 500 Index <.SPX> was down 0.53 points, or 0.04 percent, at 1,256.55. The Nasdaq Composite Index <.IXIC> was down 13.05 points, or 0.49 percent, at 2,642.71.
France and Germany were planning to force changes to EU rules in hopes of restoring market confidence and preventing the two-year-old sovereign debt crisis from widening. European shares were flat.
General Electric Co
Fellow Dow component 3M Corp
On the downside, Darden Restaurants Inc
(Reporting By Ryan Vlastelica; Editing by James Dalgleish)