Stocks fell sharply in late-morning trading after emails disclosed by President Donald Trump's eldest son cited Russian support for his father's 2016 election campaign.
The emails referred to a top Russian government prosecutor offering the Republican Trump campaign damaging information about Democratic rival Hillary Clinton.
But the market recovered later as U.S. Senate Republican leader Mitch McConnell announced a two-week delay in the Senate's August recess to provide more time to work on legislation and approve nominees, signaling prospects of progress on the Republican agenda.
"It's a play off hope. We had something that might be negative and now we have something that might be positive," said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.
The Senate's delayed break "says to me there's a commitment to make some of the changes that the markets would like to see," while Trump Jr's email exchange could put more focus on the Russia-related investigations that have overshadowed the White House, he said.
Uncertainty over whether the Trump administration would be able to push through its agenda this year has weighed on the market, especially after repeated delays in getting a new health care bill passed.
The Dow Jones Industrial Average closed up 0.55 point to 21,409.07, the S&P 500 lost 1.9 points, or 0.08 percent, to 2,425.53 and the Nasdaq Composite added 16.91 points, or 0.27 percent, to 6,193.31.
Among sectors, energy <.SPNY> led gains, with a 0.5 percent increase, following gains in oil prices
Upcoming congressional testimony from Federal Reserve Chair Janet Yellen could shed light on the pace of U.S. monetary tightening. Yellen will deliver her semi-annual monetary policy testimony before the House Financial Services Committee on Wednesday.
Investors are also keeping an eye on second-quarter earnings reports on Friday from big U.S. banks including JPMorgan Chase
"Investors are sitting on their hands waiting to see what's pushing the next move," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. "They’re not seeing any reason to be enthusiastically buying stocks so close to a high."
Snap shares have tumbled some 45 percent from a high hit shortly after their debut and slipped under their $17 IPO price for the first time on Monday.
Advancing issues outnumbered declining ones on the NYSE by a 1.10-to-1 ratio; on Nasdaq, a 1.10-to-1 ratio favored advancers.
The S&P 500 posted 27 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 81 new highs and 69 new lows.
Volume was light, with about 5.9 billion shares changing hands on U.S. exchanges. That compares with the 6.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.- Reuters