The Dow Jones industrial average (INDU) lost 47 points, or 0.5%. The S&P 500 (SPX) index lost 2 points, or 0.2%. The Nasdaq composite (COMP) lost 2 points, or 0.2%.

Stocks churned in the early going, before turning lower after the 10 a.m. ET release of the consumer confidence report. By afternoon, stocks were volatile, bouncing across the unchanged line.

"Many people believe that you still need to see the consumer come back for the recovery to be sustainable," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "If consumers aren't confident, they're not going to spend."

After sliding last week, stocks bounced back Monday as investors welcomed multi-billion dollar merger news involving Abbott Labs (ABT, Fortune 500) and Xerox (XRX, Fortune 500).

But the advance was short lived, with investors again showing caution after a seven-month rally that has left the leading indexes at nearly one-year highs.

"We continue to wait for the market to slow down," said Scott Armiger, portfolio manager at Christiana Bank & Trust.

Since bottoming at a 12-year low March 9, the S&P 500 has gained just shy of 57% and the Dow has gained around 49%, as of Tuesday's close. After hitting a six-year low, the Nasdaq has gained nearly 68%.

Bets that the economy is slowly starting to recover -- plus the impact of extraordinary amounts of fiscal and monetary stimulus -- have fueled the market advance.

Despite pervasive calls for a September selloff, stocks have held on to gains and moved higher this month.

"You don't know if a September selloff has just been pushed into October or if a big selloff can be avoided altogether," he said.

Economy: Consumer confidence dropped in September, potentially a bad sign ahead of the critical holiday retail sales period. The Conference Board said its consumer confidence index fell to 53.1 from 54.5 in August. Economists surveyed by Briefing.com were expecting the index to rise to 57.

The pace of falling home prices continued to slow, according to a report released before the markets opened. The Case-Shiller 20-city home price index rose 1.6% in July from June, more than triple what economists surveyed by Briefing.com were expecting.

Prices dropped 13.3% in July versus a year ago, a decline that was slower than the drop of 14.2% economists were expecting. Prices fell 15.4% year-over-year in June.

Company news: CIT Group (CIT, Fortune 500), fighting to pay off debt and avoid bankruptcy, is reportedly negotiating a new credit facility that could total $10 billion. Shares of the lender jumped 31%. Earlier, reports said that hedge fund manager John Paulson was considering merging CIT with failed mortgage lender IndyMac.

Dell unveiled its newest high-end, super-thin personal computer late Monday. Called the Latitude Z, the 4.5-pound PC will retail for $1,999. Dell (DELL, Fortune 500) shares fell 3% Tuesday.

JPMorgan Chase (JPM, Fortune 500) said it is shuffling some of the management responsibilities of its successful investment banking and asset management units. Shares were little changed.

Drugstore chain Walgreen (WAG, Fortune 500) reported weaker quarterly earnings and higher quarterly revenue, both of which topped analysts' estimates. Shares rose 9%.

Sequenom (SQNM)'s board said it has removed most of its management team, including the CEO, following a scandal involving mishandling of research and results on its prenatal Down syndrome test. Shares of the genetic analysis product developer fell 39% in unusually active NYSE trading.

Market breadth was negative. On the New York Stock Exchange, losers narrowly edged winners on volume of 1.18 billion shares. On the Nasdaq, decliners topped advancers by five to four on volume of 2.11 billion shares.

One-year later: Tuesday is the first anniversary of the Dow's biggest one-day point loss of all time, when the average plummeted 777.68 points and the broad market knocked out $1.2 trillion in value.

The plunge followed the House of Representatives's decision to reject the government's then $700 billion bank bailout plan. With banks around the globe teetering on the brink of collapse and credit nearly frozen, the decision sparked a panic that battered stocks in every sector.

The crash followed a brutal two-week roller-coaster, triggered by the near-meltdown of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and the collapse of Lehman Brothers.

World markets: Global markets were mixed. In Europe, London's FTSE 100 and France's CAC 40 were little changed, while Germany's DAX slipped. Asian markets rallied, with the Japanese Nikkei rising 0.9%.

Currency and commodities: The dollar rose versus the yen and euro, pushing higher after repeatedly hitting one-year lows against a basket of currencies over the last few weeks.

U.S. light crude oil for October delivery fell 13 cents to settle at $66.71 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose 30 cents to settle at $994.40 an ounce. Gold closed at a record high of $1,020.20 two weeks ago.

Bonds: Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.29% from 3.28% late Monday. Treasury prices and yields move in opposite directions. 

NEW YORK (CNNMoney.com) -- Stocks surged Monday, recharging their recent advance after a one-week break, as a pair of multi-billion dollar merger announcements gave investors a reason to get back into equities.

The Dow Jones industrial average (INDU) gained 124 points, or 1.3%. The S&P 500 (SPX) index rallied 19 points, or 1.8%. The Nasdaq composite (COMP) rose 40 points, or 1.9%.

Last week, the S&P 500 fell more than 2%, in its biggest one-week selloff in nearly 3 months. The declines occurred as investors mulled weaker-than-expected housing reports and an as-expected Federal Reserve decision to hold interest rates steady.

But over the last 7 months, investors have mostly used the dips as an opportunity to get back into stocks at lower levels, something that happened Monday, too.

"The two big mergers really hammer home the point that the credit market is improving," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

He said merger news and the recent series of initial public offerings that have come to market go a long way to counter worries that the stock advance is out of pace with the still-sluggish economy.

"These are bullish signs," he said.

Since bottoming at a 12-year low March 9, the S&P 500 has gained 57% and the Dow has gained 49.5%, as of Monday's close. After hitting a six-year low, the Nasdaq has gained 68%.

Stock gains were broad-based Monday, with 28 of 30 Dow components rising, led by Boeing (BA, Fortune 500), 3M (MMM, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), Johnson & Johnson (JNJ, Fortune 500) and Travelers Companies (TRV, Fortune 500).

The only stocks that didn't gain were IBM (IBM, Fortune 500) and Kraft Foods (KFT, Fortune 500).

Tuesday preview: Tuesday brings readings on consumer confidence from the Conference Board and the 20-city home price index from Case-Shiller.

Tuesday is also the one-year anniversary of the Dow's biggest one-day point loss of all time. On that day, the average plummeted 777.68 points, and the broad market knocked out $1.2 trillion in value. The plunge occurred after the House of Representatives rejected the government's then $700 billion bank bailout plan as a number of banks around the globe teetered on the brink of collapse.

Deal news: Abbott Laboratories (ABT, Fortune 500) is buying the drug unit of its development partner, Belgian pharmaceutical company Solvay, for about $6.6 million in cash. Abbot shares rose 2.6%.

Xerox (XRX, Fortune 500) is buying Affiliated Computer Services (ACS, Fortune 500) for $6.4 billion in cash and stock. Shares of Xerox lost 14.5%, while shares of Affiliated, an outsourcing firm, gained 14%.

Private equity firm American Securities said it is buying GenTek (GETI) for $411 million in cash. GenTek makes specialty chemicals and engine parts.

Johnson & Johnson (JNJ, Fortune 500) bought an 18% stake in biotech firm Crucell for $444 million as part of a deal to develop a flu vaccine.

Often, deal news lifts the broad market as it is seen as a sign of corporate confidence.

World markets: Global markets were mixed. In Europe, London's FTSE 100, France's CAC 40 and Germany's DAX all gained. Asian markets ended lower, with the Japanese Nikkei losing 2.5%.

Currency and commodities: The dollar rose versus the euro and fell versus the yen. The greenback has repeatedly hit one-year lows against a basket of currencies over the last few weeks.

U.S. light crude oil for October delivery rose 82 cents to settle at $66.84 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $2.50 to settle at $994.10 an ounce. Gold closed at a record high of $1,020.20 two weeks ago.

Gas prices dropped below $2.50 a gallon for the first time since late July on rising supplies and diminishing demand.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.28% from 3.32% late Friday. Treasury prices and yields move in opposite directions.

Trading volume was light because of the Jewish holiday of Yom Kippur.

Market breadth was positive. On the New York Stock Exchange, winners topped losers four to one on volume of 978 million shares. On the Nasdaq, advancers topped decliners three to one on volume of 1.93 billion shares. 

The Dow Jones industrial average (INDU) lost 81 points, or 0.8%. The Dow ended the previous session at the highest point since Oct. 6, 2008. The S&P 500 (SPX) index fell 10 points, or 1%, after ending the previous session at the highest level since Oct. 3.

The Nasdaq composite (COMP) fell 14 points, or 0.7%, after finishing the previous session at the highest mark since last Sept. 26.

The major indexes have repeatedly closed at near 1-year highs over the past two weeks. Stocks are likely to keep batting up against those levels until the start of the third-quarter financial reporting period late next month, said Jeff Kleintop, chief market strategist at LPL Financial.

"I think there will be a lot of upside surprises," Kleintop said. "In the second-quarter, we saw better-than-expected earnings mostly on cost cutting and little revenue growth. This time we'll still see the impact of cost cutting but I think we'll also see revenue growth."

He said that this fundamental improvement in Corporate America should give the rally another push.

Stocks initially rallied after the Fed announcement Wednesday, but failed to hold gains as investors used the latest nearly one-year milestone for the market as a reason to sell. A milder-than-expected response to a government auction of $40 billion in five-year notes also contributed to the late declines.

There wasn't much in the statement that had market-moving potential, said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. "The outlook was consistent with the reports we've seen recently and with what the Fed has been saying."

Thursday brings the weekly jobless claims report from the Labor Department and the existing home sales report from the National Association of Realtors (NAR).

Also, the G-20 summit in Pittsburgh begins. The Group of 20 leading developed and emerging countries will discuss the ongoing efforts to stabilize economies after the financial market meltdown.

Fed: The Federal Reserve kept the fed funds rate, a key short-term bank lending rate, at a level near zero, as expected. The announcement was made at the end of its two-day policy meeting.

In the statement, the bankers said that "economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased."

But the bankers also noted that consumer spending has remained under pressure due to the rough jobs market and still-tight credit conditions. Last week, Federal Reserve chief Ben Bernanke said the recession was very likely over, but the labor market still has a long way to go.

In light of the continued challenges, the Fed reiterated Wednesday that it was likely to keep the fed funds rate at the historic lows for the foreseeable future.

Investors were also looking for more on how the Fed plans to eventually wind down programs that have pumped as much as $1 trillion into the economy to cushion the blow of the recession.

To that end, the Fed said it will stretch its purchases of $1.25 trillion of mortgage-backed securities from Freddie Mac and Fannie Mae through the end of the first quarter of 2010. Previously, the program was set to end through Dec. 31. The program has so far succeeded in helping to lower mortgage rates.

Shapiro said that this change was the most interesting detail in the statement. "In terms of buying mortgage-backed securities, the Fed is the only game in town and so maybe they hope that in six months, the world will have had enough time to heal so that someone else can jump in."

One-year highs: The major gauges are back near levels not seen since shortly after the collapse of Lehman Bros. last September.

Despite rampant calls for a fall selloff, investors have used any modest pullback this month as an opportunity to get back into stocks at a slightly lower level. Analysts say fears of having missed the boat on the rally have driven the latest spate of gains.

Since bottoming at a 12-year low March 9, the S&P 500 has gained 56.8% and the Dow has gained 48.9%, as of Wednesday's close. After hitting a six-year low, the Nasdaq has gained 68%.

Stocks have risen during this period on signs that the economy is slowly starting to recover, and on extraordinary amounts of fiscal and monetary stimulus.

Company news: American Airlines and US Airways Group both slipped after announcing plans to raise cash, dragging down the whole airline sector.

American said it has priced its offering of 48.5 million shares of common stock, as well as $400 million in 5-year notes, with both offerings due to close Monday. The two sales should give American about $770.5 million after fees and expenses. American parent AMR (AMR, Fortune 500) fell 7.8%.

US Airways Group (LCC, Fortune 500) said it will sell 26.3 million shares of its common stock to Citigroup, the offering's underwriter, with the sale due to close Monday. US Airways fell 13.6%.

The NYSE Arca Airline (XAL) index lost 2%.

General Mills (GIS, Fortune 500) reported higher quarterly earnings that topped forecasts and boosted its full-year outlook, due to strong sales of Cheerios, Trix and its other cereal brands. Shares rose over 4%.

Washington: Treasury Secretary Timothy Geithner told a House committee that U.S. economic growth appears to be picking up, but that reforms must be enacted to fix a broken system. He was testifying at a House Financial Services committee hearing on regulatory reform.

At least one million people could be eligible for an additional 13 weeks of unemployment benefits, following a House of Representatives bill approved Tuesday night. The Senate is expected to take up the issue soon, although it faces some questions about how it should be funded.

World markets: Global markets were mostly higher. In Europe, London's FTSE 100, France's CAC 40 and Germany's DAX all ended lower, giving up gains. In Asia, the Hong Kong Hang Seng fell 0.5%, while Japan's market was closed for a holiday.

Currency and commodities: The dollar held on to gains versus the yen and euro following the Fed announcement. The greenback had touched a fresh one-year low against a basket of currencies in the morning.

The strength in the dollar dragged on dollar-traded oil and gold prices.

U.S. light crude oil for October delivery fell $2.79 to settle at $68.97 a barrel on the New York Mercantile Exchange, dropping after a government report showed a big jump in weekly crude supplies.

COMEX gold for December delivery fell $1.10 to settle at $1,014.40 an ounce. Gold closed at a record high of $1,020.20 last week.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.41% from 3.44% late Tuesday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners narrowly topped losers three to two on volume of 1.32 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.72 billion shares.  

NEW YORK (CNNMoney.com) -- Falling commodity prices and financial shares dragged on blue chips Monday, keeping the market choppy after a more than six-month advance.

The Dow Jones industrial average (INDU) lost 41 points, or 0.4%. The S&P 500 (SPX) index lost about 4 points, or 0.3%. The Nasdaq composite (COMP) gained 5 points, or 0.2%, ending at a fresh one-year high.

Stocks managed to hit fresh 2009 highs Friday as investors continued to shake off calls for a September selloff. But with the major indexes up substantially since March, stocks are vulnerable to a pullback, analysts said.

Since bottoming at a 12-year low March 9, the S&P 500 has gained 58% and the Dow has gained 50%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 68%.

Stocks have risen during those 6-1/2 months due to slowly improving economic news and extraordinary amounts of fiscal and monetary stimulus. But analysts say that the run has been too much, too soon.

"The biggest challenge in the next few weeks and month is going to be corporate earnings," said Kevin Mahn, managing director at Hennion & Walsh.

He said that the profit reports as a whole are likely to be less upbeat than what some investors are looking for. "I think the disappointing earnings will be a validation that the recovery hasn't really started."

This could provide the catalyst for a modest pullback of 5% to 7% that would then bring back in buyers who have been waiting for a selloff to provide an in at lower levels.

This week: The Federal Reserve, meeting Tuesday and Wednesday, is likely to hold short-term interest rates steady at historic lows near zero. Last week, Fed chief Ben Bernanke said the recession is likely over but the labor market still has a long way to go.

Over the weekend, President Obama said that job growth won't kick in until the end of the recovery, sometime next year.

Also Tuesday, the Federal Housing Finance Agency (FHFA) releases its July home price index. Prices are expected to have risen 0.5% after rising 0.5% in June.

Reports on housing and consumer sentiment are due later in the week. On Thursday, the Group of 20 leading developed and emerging countries will meet in Pittsburgh to discuss the global economy in the wake of the recession.

Economy: The August index of leading economic indicators rose 0.6%, according to a report from the Conference Board released Monday. That was short of forecasts for a rise of 0.7%, according to a consensus of economists surveyed by Briefing.com. LEI rose 0.6% in July.

Company news: PC maker Dell (DELL, Fortune 500) is buying Perot Systems (PER), a provider of information technology services, in a $3.9 billion all-cash deal.

Dell shares fell 4% in Monday trading, while Perot Systems rose 65%.

AIG (AIG, Fortune 500) shares rallied 21% after a Congressional report said the company has stabilized although it was unclear whether it would ever be able to pay back its federal bailout. AIG received as much as $182 billion from Treasury and the Federal Reserve at different points in time over the last year.

Home builder Lennar (LEN) reported a wider quarterly loss Monday morning, but also said it will be profitable next year if the economy remains stable. Shares fell 3%.

Among the decliners, Dow financial stocks American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) all declined.

Coca-Cola (KO, Fortune 500), McDonald's (MCD, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were among the Dow's other losers.

Market breadth was mixed. On the New York Stock Exchange, losers beat winners two to one on volume of 1.20 billion shares. On the Nasdaq, decliners topped advancers seven to six on volume of 2.42 billion shares.

Currency and commodities: The dollar gained against the yen and euro, reversing its recent declines.

The rising greenback pressured dollar-traded commodities such as oil and gold.

U.S. light crude oil for October delivery tumbled $2.33 to settle at $69.71 a barrel on the New York Mercantile Exchange. COMEX gold for December delivery fell $5.40 to settle at $1004.90 an ounce. Gold hit a record high of $1,020.20 last week.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.47% from 3.46% Friday. Treasury prices and yields move in opposite directions.

World markets: Global markets tumbled. In Europe, London's FTSE 100, France's CAC 40 and Germany's DAX all slipped. Asian markets ended lower.