"The market attracted buyers this morning as bonds held steady," said Eliot Spar, market strategist at Ryan Beck & Co.
But buyers have become more cautious than they were until last week.
Stocks fell last week as the yield of the benchmark 10-year Treasury bond topped 5% for the first time in over a year. Yields continued to rise slightly Monday, amid evidence of global growth.
The Dow Jones Industrial Average gained 0.5 points to 13,424, as 14 of its 30 components advanced, led by General Motors Corp. , Merck and Verizon .
"There's no data and not a lot of corporate news," said Art Hogan, chief market strategist at Jefferies & Co. Key economic data later in the week, including on inflation, might help determine whether U.S. bond yields continue to rise and pressure stocks further.
On the downside, were shares of Alcoa Inc. , Dupont , Home Depot Inc. and 3M Co. .
Also among blue chips, Johnson & Johnson gained 0.2%. Credit Suisse upgraded the stock to neutral from underperform, saying that it has underperformed rival pharmaceuticals by 17% and the S&P 500 by 16% over the last 12 months.
General Electric Co. and Microsoft Corp. , also on the Dow, were in focus. The Wall Street Journal reported that the companies have held discussions about the possibility of jointly acquiring Dow Jones & Co. , the publisher of this report. But they were unable to reach agreement on proceeding with a counterbid.
News Corp. has offered $5 billion, or $60 a share, for Dow Jones.
The S&P 500 rose 1.45 points to 1,509, while the Nasdaq Composite fell 1.4 points to 2,572.
Among key technology shares, Apple Inc. fell 3.4% as the company's developers conference kicked off. Apple CEO Steve Jobs showcased Leopard, the next upgrade of Apple's Macintosh operating system, but said little about the company's wildly anticipated iPhone.
"There's an adjustment going on in the market right now to the notion that interest rates are not going to come down," Chuck Lieberman, chief investment officer at Advisors Capital Management, told MarketWatch.
Trading volumes showed 1.3 billion shares exchanging hands on the New York Stock Exchange and 1.6 billion trading on the Nasdaq stock market. Advancing issues slightly topped decliners by 16 to 15 on the NYSE, while decliners topped gainers by 16 to 13 on the Nasdaq.
By sector, commodities-related stocks such as metals miners , oil majors , along with utilities , and broker dealers led the gains.
On the downside were airlines , Internet shares and real estate investment trusts .
Financial stocks, which often lead the broad market, were supported by expectations of strong results from brokers Lehman Brothers , Goldman Sachs and Bear Stearns , this week.
On Friday stocks managed a rally, paring a portion of their heavy losses for the week, as investors sought bargains in a market battered by three days of sharp drops.
There were global stocks routs last week as U.S. and foreign government bonds sold off. The selling pushed the yield on the 10-year benchmark note as high as 5.25%, equaling the federal funds rate.
Treasurys were still under pressure Monday, as Pianalto's remarks further fed expectations that rates will continue higher. But the losses didn't accelerate, keeping yields in check.
The benchmark 10-year Treasury note finished down 7/32 at 95 3/32 with a yield of 5.137%.
"We have a host of concerns, all of which are credible," said Jefferies' Hogan. "Last week we priced in for a worst-case scenario. But none of these factors have brought the U.S. economy to a screeching halt."
Rates ere back in focus on Monday. In a speech in Ireland, Cleveland Federal Reserve President Sandra Pianalto said that the housing market's deterioration had removed up to 1% from U.S. economic growth.
She also noted that economic fundamentals remain "solid" and said inflation remains the major risk to the economy, remarks likely to reinforce investor concerns that the next Fed move could be to tighten monetary policy and increase rates.
More clues about the Fed's leanings will come on Wednesday, when the latest Beige Book regional economic survey's released, and on Friday, which Chairman Ben Bernanke will speak on inflation.
The New Zealand dollar, or the kiwi dollar, tumbled after the country's central bank confirmed that it had sold the currency to weaken it. The kiwi was last down 1.8% against the U.S. dollar and down 1.6% against the Australian dollar. The dollar was up slightly against the euro and the yen.
Commodities were on the rise in the early going, with the front-month gold contract last up $8.70 at $659 an ounce.
"Bolstered by light physical buyers and on the back of an expected technical bounce, gold prices attempted a comeback on Monday morning," wrote Jon Nadler, an analyst at Kitco, in a research note.
And in energy, the front-month crude future last was $1.21 higher at $65.97 an ounce.
Stocks of note
The New York Times is reporting that the Bush administration has repeatedly defended Microsoft both in the U.S. and abroad against accusations of anticompetitive conduct. But some state attorneys general may pursue accusations made by Google Inc. over Microsoft's operating system.
International Business Machines Corp. disclosed that it's the suitor behind a $746 million offer for Telelogic . The Financial Express said IBM also is trying to buy Citigroup's Indian outsourcing division.
After the close of trade, there will be a mid-quarter update from Texas Instruments Inc. .
By Nick Godt