Stocks struggled to a mixed finish on Monday, just days after the Dow Jones industrial average rose above 11,000 for the first time since early May.
Trading was muted with no major economic or earnings reports out. Investors were looking ahead to more corporate earnings this week. The Dow was stuck in a 35-point range throughout the day.
Bond trading was closed for Columbus Day.
Investors have been betting that the Federal Reserve will act in the coming weeks to stimulate the economy and drive interest rates lower. Hopes have been building that the Fed could announce an expansion of its bond-buying program as soon as its next meeting Nov. 2-3. The bond market was closed Monday for the Columbus Day holiday.
Tom Samuels, managing partner at Palantir Capital Management, said the stock market has even been reacting to disappointing reports in recent days because that adds to the expectations the Fed will act soon.
"The market is trying to convince itself that good news is good news and bad news is good news," Samuels said. The Dow has risen five of the past six weeks and is now less than 2 percent from its highest level of the year, which it touched in late April.
Interest rates have also been plummeting in anticipation of the Fed's move, and those lower rates make stocks more attractive.
"The 10-year rate is going to make stocks look cheaper and cheaper compared to bonds," said Bob Phillips, managing partner at Spectrum Management Group. The yield on the 10-year Treasury note is often used to set interest rates on loans. It was at 2.39 percent Friday, near its lowest level since January 2009.
Traders will get key economic reports at the end of the week, including data on inflation, retail sales and consumer sentiment, that could influence trading. The Fed has said part of the reason it might buy bonds is to get inflation more in line with historical levels.
In corporate news, shares of Gymboree Corp. jumped 22.6 percent after Bain Capital agreed to buy the children's clothing retailer for $1.8 billion.
Earnings season also picks up this week with industry bellwethers Intel Corp., JPMorgan Chase & Co. and General Electric Co. releasing quarterly results.
Channing Smith, portfolio manager at Capital Advisors Growth Fund, said that earnings could take a backseat to the Fed.
"The market is so focused on the Fed stepping in," Smith said. "There will be some interest on revenue growth. (Corporate outlooks) will be important. But the Fed trumps that."
The Dow Jones industrial average gained 3.63, or 0.03 percent, to close at 11,010.11.
The Standard & Poor's 500 index rose 0.15 to 1,165.30, while the Nasdaq composite index rose 0.42, or 0.02 percent, to 2,402.33.
Rising stocks narrowly outpaced declining ones on the New York Stock Exchange, where volume came to 825 million shares.
The dollar rose Monday against the euro and Japan's yen. It had been falling consistently in recent weeks against those two currencies. Lower interest rates on American bonds would make it less attractive for foreign investors to hold the dollar. A weekend meeting of the International Monetary Fund and Group of 20 finance ministers did not yield any new agreements over the recent currency moves.