"News of a quarterly loss from UBS, and a 60% drop in Q3 net income from Citigroup, may bring credit-market concerns back to the forefront," said analysts at Action Economics.
"We are getting more nervous with the markets as they once again get close to tagging their all-time highs without the benefit of many individual stocks participating," Paul Nolte, director of investments, Hinsdale Associates, wrote in an early note.
After crossing the 14,000-level for the first time since late July, the Dow Jones Industrial Average more recently rose 139.7 points to 14,035.4, after hitting an intraday high of 14,038.0.
All but three of the Dow's 30 components trading higher, led by Home Depot Inc. , up 1.6%, and Intel Corp., , which rose 3.3%.
Alcoa Inc. fronted the Dow's few declines, with its stock off 0.4%, followed by AT&T Inc. , off 0.3%.
The S&P 500 advanced 15.22 points to 1,541.97, and the Nasdaq Composite gained 27.67 points to 2,729.17.
Volume at the New York Stock Exchange reached 545 million shares, and advancing stocks outran decliners nearly 4 to 1. At the Nadaq, 794 million shares exchanged hands, and advancers outplayed declining issues more than 2 to 1.
Dow component Citigroup said it anticipates a third-quarter profit drop of about 60%, blaming this on "dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer-credit environment."
In a similar vein, Swiss investment bank UBS AG said it would take a $3.4 billion hit against third-quarter profit tied to its subprime mortgage exposure. .
A gauge of manufacturing activity came in below expectations, but investors appeared to brush the news aside, with the major indexes only adding to their gains after the Institute for Supply Management released its manufacturing index for September, with the measure registering at 52.0%, down from 52.9% in August.
Shares of Walgreens Co. were off 13.1% after the retailer said fiscal fourth-quarter net income fell to $396.5 million, or 40 cents a share, from $412.3 million, or 41 cents a share, with sales rising to $13.42 billion from $12.17 billion. Analysts had, on average, expected earnings of 47 cents a share on revenue of $13.54 billion.
Shares of wireless-phone maker Nokia Corp. fell 2.6% after it agreed to purchase digital map supplier Navteq Corp. for $78 a share, or $8.1 billion. Shares of Navteq slid 1.1% .
Acxiom Corp. fell 18.6% after its deal to be taken private fell through. Suitors agreed to pay the data-management company a termination fee totaling $65 million.
Shares of Chicago Mercantile Exchange Holdings Inc. gained 2% following their upgrade to outperform from market perform by Wachovia.
On the New York Mercantile Exchange, crude-oil futures edged lower, extending their sharp losses from the prior session, with crude for November falling 45 cents to $81.21 a barrel. .
Gold futures edged lower after rallying to a 27-year high during Friday's session and ending at $750 an ounce. Gold for December delivery recently fell 53 cents to $81.13 an ounce. .
Treasurys rose, sending yields lower, with the benchmark 10-year note up 2/32 at 101 11/32, its yield at 4.58%.
In currencies trade, the dollar firmed against the euro and yen as stocks rallied. .
Overseas, European markets started the fourth quarter cautiously, with the banking sector under pressure. .
Asian stocks closed mostly higher, although Japanese shares traded erratically. .
By Kate Gibson