Tough session on Wall Street

NEW YORK (CNNMoney.com) -- The major gauges ended little changed Monday, masking a volatile session in which investors weighed worries about the economy with the wish to scoop up stocks battered during the previous session's big sell-off.

Bond prices jumped as stock investors sought safety in other assets. The dollar was mixed versus other major currencies. Oil and gold prices rose.

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The Dow Jones industrial average (up 14.47 to 13,127.85, Charts) rose 0.1 percent, while the broader S&P 500 (down 1.85 to 1,451.70, Charts) index eased 0.1 percent. The tech-fueled Nasdaq Composite (down 6.59 to 2,559.11, Charts) fell 0.3 percent.

Stocks started Monday on a positive note due to Intel's improved profit outlook, but the early advance proved unsustainable amid worries about the broad economy.

Investors were thrown by comments from a slew of Fed officials that seemed to cool bets that the central bank will announce a big interest rate cut at next week's policy meeting.

"Early on we heard comments from [Atlanta Fed president Dennis Lockhart] about how bad the economy has been for a long period, even before the credit problems," said Art Hogan, chief market analyst at Jefferies. "It made people concerned that it's too late for the Fed to salvage things with a rate cut."

"But investors are starting to realize that both the Dow and S&P are looking attractively valued when you look at earnings projections for the year, and that we've already priced a lot of worst-case scenarios in," he said.

Tuesday morning brings the release of the July trade balance report, which is expected to have widened to $59.0 billion from $58.1 billion in the previous month, according to a consensus of economists surveyed by Briefing.com.

The Dow fell 250 points on Friday after a surprise drop in August payrolls raised worries that the problems in the housing and financial markets are spreading to the rest of the economy.

The weak jobs report raised bets that the Federal Reserve will need to cut a key short-term interest rate when it holds its policy meeting next week.

But those bets were challenged Monday by comments from a number of Fed officials.

San Francisco Fed President Janet Yellen said that although market turmoil could hurt the economy, rate policy isn't there to bail out investors, AP reported.

Earlier, Atlanta Fed president Dennis Lockhart said that the central bank has to take any information on the labor market seriously, but that last Friday's report is backward-looking and should be viewed alongside recent signs of solid retail sales and still-strong consumer spending.

Also, over the weekend, Fed president Charles Plosser said that although the weak August jobs report was not encouraging, it was not reason alone to cut interest rates.

Yellen and Lockhart are not voting members of the Fed's policy committee, while Plosser, an alternate member, also does not vote.

Fed Governor Frederic Mishkin, who is a voting member of the policy committee, speaks later in the day.

The stock market is bound to remain very choppy in the lead up to that meeting, said Dave Hinnenkamp, CEO of KDV Wealth Management. "I think we're going to see relatively high volatility and any market increases will be met with profit taking."

In corporate news, chip-maker Intel (down $0.12 to $25.35, Charts, Fortune 500) said third-quarter revenue should top estimates, thanks to strong worldwide demand for its products, sending shares up initially. But the stock closed lower.

Aluminum producer Alcoa (down $0.82 to $34.05, Charts, Fortune 500), a Dow component, continued to erode for a second session, losing 2.4 percent.

Countrywide Financial (down $1.00 to $17.21, Charts, Fortune 500), the poster child for the subprime mortgage fallout, said late Friday that it will cut between 10,000 and 12,000 jobs, or 20 percent of its work force, over the next three months. Shares slipped 5.5 percent Monday.

A variety of metal and mining stocks fell, including gold, silver, and aluminum.

Railroad, trucker and airline stocks fell, pulling down the Dow Jones Transportation (down $18.54 to $2,780.95, Charts) average by 0.8 percent.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by 5 to 3 on volume of 1.34 billion shares. On the Nasdaq, losers topped winners by almost 2 to 1 on volume of 1.81 billion shares.

Treasury prices rose, adding on to Friday's big rally on continued bets that the Fed will need to cut interest rates when it meets next week. The advance lowered the yield on the 10-year note to 4.32 percent from 4.38 percent late Friday. Bond prices and yields move in opposite directions.

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

U.S. light crude oil for October delivery rose 79 cents to settle at $77.49 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $2.50 to $712.20 an ounce.