Share prices were higher in choppy trade as defensive buying in the pharmaceutical sector, gains among technology stocks and tobacco companies helped offset a weak retail sector after Sears issued a third-quarter profit warning, dealers said.
Uncertainty over the US position on Iraq ahead of a key presidential address to the nation on the matter was also keeping investors sidelined.
At 12.31 am, the DJIA up 106.12 at 7,634.52, just off session highs, the S&P 500 was 7.32 higher at 807.90 while the Nasdaq composite was up 4.93 at 1,144.83
The DJIA spent most of the morning dipping in and out of positive territory, with dealers attributing the volatility to light volume ahead of President George W. Bush's speech on Iraq.
"There is still a lot of trepidation out there in the market," said Jay Susskind, director of trading at Ryan, Beck and Co. "People remain nervous about the economy and that's keeping a cap on the markets. And of course there's the Iraqi situation to consider."
"We're in the middle of a bear market. We're trading in a range with people afraid to buy and some afraid to sell off. It's a tug of war with not a lot of conviction either way."
The DJIA received support in early trade from Intel as it outperformed the chip sector after chief executive Craig Barrett told the Financial Times' online edition that the computer sector might start to show recovery in 2003, but the telecoms sector not before early 2004.
Intel was 33 cents or 2.41% at 14.40.
A more downbeat assessment of the prospects for the semi-conductor sector from Prudential Securities however hit other chip makers.
AMD was down 7 cents at 3.44, Texas Instruments was off 3 cents at 14.65, Applied Materials dropped 28 cents at 11.04 while Motorola slipped 16 cents at 9.85.
Prudential Securities cut the sector to 'market under-perform' from 'market outperform' citing a slower than expected recovery in 2003.
Among other technology stocks, Cisco Systems was sharply lower, shedding 31 cents or 3.28% at 9.15 after after Goldman Sachs and Deutsche Bank reduced earnings estimates on the back of a deteriorating trading environment.
Pharmaceutical stocks clawed back some of the losses seen on Friday after a woman suffering from lung cancer was awarded $28bn (€28.5bn) against Philip Morris.
Philip Morris was up $1.91 or 5.22 at 38.50 while RJR Reynolds was 2.03 higher at 37.13.
Earlier today, Goldman Sachs said it expected the $28 billion to be cut to 20-$100 million.
Pharmaceutical stocks provided some upward momentum with Johnson & Johnson up 87 cents at 57.82, Schering-Plough up 55 cents at 17.85, Eli Lilly 1.44 higher at 56.86 while Pfizer climbed 49 cents at 29.04.
"There is a little safety play going on," said Susskind.
The retail sector was under pressure in morning trade after Sears issued a third quarter profit warning, saying it expects earnings per share of 80-82 cents for the period, compared with 80 cents a year ago, and below the First Call/Thomson Financial consensus of 86 cents.
The company said it was sticking to its full year guidance of comparable EPS of $5.15.
Sears slumped $3.63 or 9.64% at 33.01, Wal-Mart was down 28 cents at 51.47, JC Penney was off 69 cents at 14.65 and Home Depot slid 68 cents at 25.12.
JP Morgan outperformed the wider banking sector, up 52 cents at 17.06, as investors welcomed its attempt to tackle slumping profits and falling revenues on reports it is planning to cut 4,000 jobs worldwide in an attempt to shore up profits in the face of slumping revenues.
"Job cuts are always a way of trying to eliminate costs and boost the bottom line but the pressure of the downward trend in the market in general is a little too much today," said Peter Cardillo, chief strategist at Global Partners Securities.
Separate reports saying that Merrill Lynch was planning to shed 1,000 jobs however did little to help the stock which was down 58 cents at 29.59.
Among other banks, Bank of New York was down 42 cents at 22.13 while Citigroup fell 68 cents at 27.30.
In the airline sector, AMR was down 26 cents at 4.06 after it said it will book a total charge of $990m (€1.008bn) to write off goodwill in accordance with a change in accounting standards.
UPS and Fedex shares fell in early trade after Morgan Stanley cut its rating on both stocks to 'equal-weight' from 'underweight' and said that at current levels, the two companies have the least upside potential in the US freight transportation sector.
UPS was down 1.83 at 59.77 while Fedex dropped 1.45 at 49.61.