Stocks try to stay positive

NEW YORK (CNNMoney.com) -- Stocks inched higher Monday in tentative morning trading as investors continued to welcome the Federal Reserve's decision to cut the discount rate, but remained wary after a volatile period on Wall Street.

The Dow Jones industrial average (Charts) added a few points over an hour into the session, while the broader S&P 500 (Charts) index was little changed. The tech-fueled Nasdaq Composite (Charts) index gained 0.2 percent.

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Stocks jumped Friday after the central bank cut the discount rate - the rate the Fed 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.

However, on the heels of such a big stock rally Friday, investors were more cautious Monday.

In corporate news, Countrywide Financial (up $0.05 to $21.48, 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 inched higher Monday morning.

Fellow mortgage lender Thornburg Mortgage (down $1.48 to $13.56, Charts) said it sold over 35 percent of its assets and reduced its borrowing to lower its risk, sending shares more than 11 percent lower.

Lowe's (up $1.60 to $28.47, Charts, Fortune 500) reported a bigger-than-expected jump in second-quarter profits Monday, sending shares more than 6 percent higher.

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 for September delivery fell 96 cents to $71.02 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 rose 90 cents to $667.70 an ounce.

Treasury prices gained, lowering the benchmark 10-year note yield to 4.64 percent from 4.67 percent late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and gained versus the yen.