NEW YORK (CNNMoney.com) -- The Dow Jones industrial average staged a comeback Monday, recovering from an earlier selloff sparked by renewed worries about the credit and mortgage markets.
The Dow Jones industrial average (up 42.27 to 13,121.35, Charts) added about 0.3 percent, while the broader S&P 500 (down 0.39 to 1,445.55, Charts) index ended little changed. The tech-fueled Nasdaq Composite (up 3.56 to 2,508.59, Charts) index gained a few points.
All three major gauges seesawed throughout the session, slumping in the early afternoon, rallying in the late afternoon, and then giving up some of that advance right near the close.
Even so, the relatively mild day was a welcome relief after several weeks of extremely volatile markets, said Art Hogan, chief market analyst at Jefferies & Co.
"We'll take it," Hogan said. "There were no disasters, nobody blew up. The worst piece of news was that Thornburg took a massive loss, but that's mostly bad news for Thornburg."
He was referring to lender Thornburg Mortgage (down $1.54 to $13.50, Charts), which said Monday that it sold over 35 percent of its assets and reduced its borrowing to lower its risk. Shares fell 10 percent.
Stocks have gotten pummeled in volatile trading in recent weeks, reflecting investor worries about ongoing problems in the credit and mortgage markets.
After the close, Capital One Financial (Charts, Fortune 500) said it was closing its troubled GreenPoint mortgage unit, that it will cut 1900 jobs and shutter 31 offices by the end of the year. Shares fell 2 percent in extended-hours trading.
Retailers Staples (Charts, Fortune 500) and Target (Charts, Fortune 500) report quarterly earnings Tuesday morning.
Stocks jumped Friday after the Federal Reserve cut its little used discount rate - the rate the central bank charges banks for temporary loans - by a half-percentage point to 5.75 percent. Although it did not cut the more widely-watched fed funds rate, which affects consumer loans, the move nonetheless soothed worries about the credit and mortgage markets that have roiled Wall Street for weeks.
Additionally, the move raised bets that the Fed will cut the fed funds rate at the Sept. 18 policy meeting. On Monday, the central bank said it had added another $3.5 billion to the banking system overnight, extending its recent run of infusing cash into the system, in tune with central banks worldwide.
But credit worries remain on Wall Street and are not likely to disappear anytime soon, particularly with the next Fed meeting one month away.
"As long as the Federal Reserve and other central banks worldwide can keep the liquidity flowing, the crisis for stocks will be limited," said Robert Loest, portfolio manager at Integrity Funds. "The fallout for the housing market will be longer term."
"If investors can wait out a few more weeks, I think conditions will improve," he added.
He said that for the time being, investors should stay away from stocks that are banking-, housing- or consumer-related.
J.P. Morgan Chase (down $0.52 to $46.49, Charts, Fortune 500) was one of the Dow's biggest losers, attesting to the midday selloff in financial stocks. Hewlett-Packard (down $0.57 to $46.58, Charts, Fortune 500) and IBM (down $1.68 to $109.22, Charts, Fortune 500) also declined.
But a number of Dow stocks rose, including Honeywell (up $1.36 to $55.82, Charts, Fortune 500), Intel (up $0.41 to $24.11, Charts, Fortune 500), Caterpillar (up $1.41 to $74.05, Charts, Fortune 500), Alcoa (up $1.03 to $34.32, Charts, Fortune 500) and other recently battered components.
In other news, Countrywide Financial (down $1.62 to $19.81, Charts, Fortune 500) has reportedly started laying off employees, in an effort to cut costs amid its ongoing credit crunch, the Wall Street Journal reported. Shares of the troubled mortgage lender fell 7.5 percent, erasing early gains.
SunTrust (down $0.58 to $79.92, Charts, Fortune 500) banks said it will cut about 2,400 jobs or 7 percent of its workforce by 2009. Shares inched lower.
Lowe's (up $1.63 to $28.50, Charts, Fortune 500) reported a bigger-than-expected jump in second-quarter profits Monday, sending shares higher.
Novellus Systems (up $0.85 to $28.11, Charts) rose after Goldman Sachs boosted its rating to "neutral" from "sell," Reuters reported.
Market breadth was mixed. On the New York Stock Exchange, winners beat losers on volume of 1.23 billion shares. On the Nasdaq, decliners and advancers were roughly even on volume of 1.38 billion shares.
In economic news, the July index of Leading Economic Indicators (LEI) rose 0.4 percent, in line with estimates, after falling 0.3 percent in June.
U.S. light crude oil fell 86 cents to settle at $71.12 a barrel on the New York Mercantile Exchange, sliding on signs that Hurricane Dean is unlikely to disrupt refining centers in the Gulf of Mexico.
COMEX gold for December delivery fell 30 cents to $666.50 an ounce.
Treasury prices gained, lowering the benchmark 10-year note yield to 4.63 percent from 4.67 percent late Friday. Bond prices and yields move in opposite directions.
In currency trading, the dollar slipped versus the euro and gained versus the yen.
Stocks continued a volatile trading day today as lingering fears over fallout from the troubled U.S. sub-prime mortgage market continued to weigh on investor sentiment. After opening at 13,078.51 points and then dropping below the 13,000 mark, the Dow Jones Industrial Average bounced back in late trading to above 13,100, but on lower volume than the previous trading day in what looked like a cover spike.

But woes persisted as flight to quality continued and the yield on the 3-month U.S. Treasury bill dropped below 2.5% -a 20 year low (U.S. Treasury bills are considered risk-free, as investors bid up the price the yield on the T-bill drops).