Investors are making only modest moves following a week-long rally as they question how quickly the economy can recover.
Stocks zigzagged in a tight range and were slightly higher in late afternoon trading Tuesday.
Weakness in regional banks tugged at the market after Regions Financial and Comerica posted second-quarter losses. That offset some enthusiasm over results at Caterpillar, which raised its full-year profit forecast.
Caterpillar gave a modest lift to the Dow Jones industrials but broader indexes traded flat.
Worries about small-business lender CIT Group flared up again after the company said a $3 billion loan from bondholders still might not be enough to cover a cash drain. Stocks had risen Monday on hopes the company would be able to avoid bankruptcy.
Caterpillar joined other major companies in issuing an improved 2009 profit forecast, even as it said its second-quarter profit fell 66% on weaker sales. Shares in the heavy equipment maker, considered a bellwether of the global economy, rose about 8%.
The good news from Caterpillar was counterbalanced by more caution about the economy from Federal Reserve Chairman Ben Bernanke. Bernanke told Congress the Fed had the tools necessary to ease off its financial rescue measures in due course. He also repeated the Fed's forecast that the economy should start growing again in the second half of this year, but only modestly and with rising unemployment.
Bernanke is stressing "that it is going to be a slow recovery with slow growth," said Dave Rovelli, managing director of trading at brokerage Canaccord Adams.
Stocks charged higher last week, when an upgrade on Goldman Sachs Group by an influential banking analyst stirred hopes that bank earnings would show an improvement in the health of the financial industry. Since then, major indexes are up about 8%, halting a month-long slide driven by fears that a recovery would not come as soon as hoped.
At the close of trading, the Dow Jones industrial average was up 67.79, or 0.8%, to 8,915.94. The Standard & Poor's 500 index rose 3.45, or 0.4%, to 954.58.
The Nasdaq composite index, which has a large representation of technology stocks, added 6.91, or 0.4%, to 1,916.20 after chipmaker Texas Instruments posted a sharp drop in profits. That stirred some unease about the strength of other tech companies.
David Chalupnik, head of equities at First American Funds, said it was natural for the market to pause after the recent run and that it will be harder for stocks to press higher because investors are harder to impress.
"Expectations are being ramped up," he said. "As earnings continue to come out better than expected you may not get that lift anymore."
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 934.1 million shares compared with 862.2 million shares.
Bond prices jumped after Bernanke's remarks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.49% from 3.60% late Monday.
Treasury investors saw Bernanke's remarks as reaffirming that the Fed would keep interest rates low for the time being — which supports the value of bonds already in circulation.
The Dow rose for the sixth straight day on Monday to finish at its highest level since January. The benchmark S&P 500 index, meanwhile, climbed to its highest close since November.
In Tuesday's trading, Caterpillar rose $2.83 to $39.48, while Texas Instruments fell 54 cents, or 2.2%, to $23.07.
Among financial companies, CIT tumbled 27 cents, or 21%, to 98 cents. Regions Financial fell 62 cents, or 15.4%, to $3.42 after it nearly tripled what it set aside for soured loans.
Comerica reported a loss as it booked a charge to pay preferred dividends to the government under the Treasury Department's financial rescue program. Shares slid $2.31, or 10.1%, to $20.51.
Other companies expected to report Tuesday include tech giants Yahoo and Apple, as well as Starbucks.
Investors still have major concerns about the economy. Unemployment remains at a 26-year high of 9.5% and the Fed predicts it will exceed 10% by year-end.
"We need a little more time and a little bit more clarity," said Frank Ingarra, co-portfolio manager at Hennessy Funds, referring to questions about how the economy will endure strains like unemployment and a weak housing market.
The dollar was mixed against other major currencies, while gold prices fell.
Oil prices rose 74 cents to settle at $64.72 a barrel on the New York Mercantile Exchange.
In other trading, the Russell 2000 index of smaller companies fell 1.74, or 0.3%, to 525.22.
Overseas, Britain's FTSE 100 gained 0.9%, Germany's DAX index rose 1.3%, and France's CAC-40 rose 1%. Japan's Nikkei stock average jumped 2.7%.