"There is uncertainty about how fast the rally can go and how far it can go," said Robert Phillips, a managing director at Spectrum Management Group of Raymond James & Associates.
Earnings results tempered investors' optimism. Office Depot said consumers and small businesses continued to pare spending, especially on pricier items like furniture and computers. The office-supply chain tumbled 97 cents, or 18.1%, to $4.38.
Coach fell 38 cents, or 1.3%, to $28.05 after the company reported that its fiscal fourth-quarter earnings dropped 32%.
Not all corporate news was downbeat. Textron jumped $1.96, or 17.6%, to $13.11 after the maker of Cessna planes, Bell helicopters and turf maintenance equipment posted a profit excluding charges. Analysts had expected a loss.
Investors welcomed dealmaking in the tech industry. The willingness of companies to pursue rivals is seen as a sign of confidence in the economy.
IBM agreed to acquire software maker SPSS for $1.2 billion. SPSS jumped $14.36, or 40.9%, to $49.45, while IBM slipped 35 cents to $117.28.
Sprint Nextel intensified its focus on the market for prepaid cellphone service by announcing a $483 million agreement to scoop up Virgin Mobile USA. Virgin Mobile rose $1.07, or 25.4%, to $5.28 and Sprint edged down 4 cents to $4.59.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell $1.15 to $67.23 a barrel on the New York Mercantile Exchange. The drop in oil hit a range of energy stocks.
The Russell 2000 index of smaller companies fell 1.07, or 0.2%, to 551.95.
Overseas, Britain's FTSE 100 fell 1.3%, Germany's DAX index lost 1.5%, and France's CAC-40 slid 1.2%. Japan's Nikkei stock average slipped less than 0.1%.