The Dow industrials rose and the S&P 500 rebounded in late trading overnight as investors' concerns about the strength of an economic recovery triggered a move into defensive stocks.

But the technology-heavy Nasdaq slipped as investors rotated out of the tech sector, which is viewed as more reliant on the economic cycle.

The mixed result in the US may have confounded local investors - this morning on the Sydney Futures Exchange, the SPI was down one point at 3748. The Australian dollar was buying 79.77 US cents, up on yesterday's notional close of 79.13 US cents and the Reuters Jefferies index of commodities prices was down - sharply - at 240.1, off 2.33 per cent for the session. That could flow through to the resources sector today, pushing mining stock prices lower.

In the US, a series of reports showing the economy is in less dire straits than it was at the start of the year drove stocks sharply higher in the spring, but lately investors have been looking for consistent evidence of a sustained recovery.

Stocks were weak through most of the session until the last half hour when the push into sectors likely to outperform in a down economy helped healthcare stocks like Merck & Co, up 3.3 per cent at $US27.89, and consumer staples like Kraft Foods, up 1.9 per cent at $US26.44.

While a report on the services sector was better than expected in June, the Institute for Supply Management's non-manufacturing data failed to relieve broader concerns raised by last week's unexpectedly weak June non-farm payrolls report. As a result, some investors turned to defensive stocks.

"Looking beyond this initial recovery phase, the economic expansion is going to be below average and that is going to be more favorable toward the defensive sectors of the market," said Henry Smith, chief investment officer of Haverford Trust in Philadelphia.

The Dow Jones industrial average gained 44.13 points, or 0.53 per cent, to 8324.87. The Standard & Poor's 500 Index added 2.30 points, or 0.26 per cent, to 898.72. But the Nasdaq Composite Index dropped 9.12 points, or 0.51 per cent, to 1787.40.

The S&P 500 has rallied as much as 40 per cent from a 12-year closing low reached on March 9. But the benchmark index is now up only 32.8 per cent since then as stocks have given up some of their gains on concerns about the economy.

American Express topped the Dow's list of biggest percentage gainers in Monday's session, climbing 5.6 per cent to $US23.52 after Stifel Nicolaus raised its rating on the company's stock to "hold," saying it was the least exposed to new rules on the credit card sector.

Investors were also looking ahead to the start of second- quarter earnings season on Wednesday for an indication of how corporations are weathering the economic downturn. Data compiled by Thomson Reuters shows about a 36 per cent decline in S&P 500 earnings from a year ago. That would be roughly the same result as the first quarter.

"The market is now wanting to see what the earnings season has in store," said Robert Auer, senior portfolio manager of SBAuer Funds in Indianapolis. "And it's not just what the numbers are. It's going to be what the companies say that's going to be more important."

Among the heaviest weights on the Nasdaq was iPhone and iPod maker Apple Inc, down 1 per cent at $US138.61.

While ISM data released earlier on Monday showed the US service sector contracted in June at a slower pace than expected, the market's sentiment was still colored by last week's much worse-than-expected jobs report.

Last Thursday, the US Labor Department reported a decline of 467,000 in nonfarm payrolls, nearly 100,000 more than expected. The US stock market was shut on Friday for the long Independence Day holiday weekend.

August crude futures touched a five-week low, tumbling $US2.68, or 4 per cent, to settle at $US64.05 per barrel on Monday. The slide in oil prices drove shares of Marathon Oil Corp down 0.8 per cent to $US28.76. Holly Corp shares slid 2 per cent to $US18.25.

Trading volume was moderate on the New York Stock Exchange, with only about 1.14 billion shares changing hands, well below last year's estimated daily average of 1.49 billion, while on the Nasdaq, about 2 billion shares traded, below last year's daily average of 2.28 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 3 to 2, while on the Nasdaq, about eight stocks fell for every five that rose.

Reuters