Stocks closed mixed in choppy trading on Monday, rising on an S&P upgrade of the United States' credit outlook, before investors later seemed to take a breather following the previous session's sharp rally and amid Fed taper talk fears.
Among key S&P sectors, telecoms led the gainers, while industrials lagged.
The ratings agency raised the U.S. sovereign credit outlook to "stable" from "negative," with a current rating of AA , adding that the likelihood of a near-term downgrade is "less than one in three."
"Under our criteria, the credit strengths of the U.S. include its resilient economy, its monetary credibility, and the U.S. dollar's status as the world's key reserve currency," S&P said. "Similarly, in our view, the U.S.'s credit weaknesses, compared with higher rated sovereigns, include its fiscal performance, its debt burden, and the effectiveness of its fiscal policy making."
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"Anytime we see something positive on the U.S. fiscal situation or the global economy, the market will see a blip—good news continues to be bad news in relation to the equity market," said Keith Bliss, senior vice president at Cuttone & Co. "The Fed has a delicate situation in front of them—can the market really sustain a pared-back support level and if the Fed does decide to scale back, how elegantly can they do it?"
Stocks have whipsawed in the last several weeks as investors continued to question when the Federal Reserve could begin to taper its asset-purchase program. Most recently, St. Louis Fed President James Bullard said labor market conditions have improved since last summer, suggesting the central bank could slow the pace of purchases, though the low inflation readings may mean the Fed can maintain its program for a longer time frame.
Bullard is a voting member of the Fed's policy-setting committee this year.
Last week, the non-farm payroll report showed the U.S. added 175,000 jobs in May, indicating the economy was expanding modestly, but not enough to convince the Federal Reserve to pare back its bond-buying program.
Apple introduced a new operating system and unveiled new MacBook Air models. In addition, the company introduced the iTunes radio, a free Internet radio service featuring over 200 stations. Meanwhile, Pandora shares dropped following the news. Apple shares were volatile following the announcements.
Asian stocks rose on Monday with Japan's benchmark Nikkei closing up nearly 5 percent, rebounding from Friday's two-month closing low, thanks to a strong GDP revision and a weaker yen. The rally provided relief to investors, who have been on edge amid the recent volatility in Japanese stocks. Bank of Japan (BoJ) is scheduled to hold a two-day meeting later this week amid talk that it could announce some measures to curb volatility in the Japanese government bond (JGB) market.
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Meanwhile, China reported weaker-than-expected trade data, slowing growth in fixed asset investments, and a big drop in producer prices. Australian and Chinese markets were closed for public holidays.
Looking ahead, notable data from the U.S. this week include retail sales, weekly jobless claims, producer price index and consumer sentiment.