(Updated from 11:09 a.m.)

As investors tried to get a handle on the corporate earnings outlook, stocks were mixed in light trading.

By now, it's a familiar storyline on Wall Street: Investors buy stocks in the hopes that an earnings recovery is on the way, then sell when companies signal otherwise. This morning, they were reacting to a profit warning from information services provider

Level 3 Communications

(LVLT)

, which was off about 15% to $6.50, and a positive affirmation about earnings from

United Technologies

(UTX) - Get Report

, which was rising.

United Technologies was up 2.9% to $76.05 after the company said it expects to have 15% growth in profits in the second quarter and the year. Its news helped lift the

Dow Jones Industrial Average -- which counts the company as one of its 30 components -- 41 points to 10,665. The

Nasdaq Composite was lower by 17.4 points, or 0.9%, to 2011. The

S&P 500, which tracks the broad market, was down about 1 point to 1213.

Investors are still betting corporate earnings will improve later this year, but a spate of recent profit warnings has been chipping away at that belief. Last week's flood of bad news sent the Nasdaq down 8.4% for the week, its largest weekly percentage drop this year. The Dow slumped 3.2% and the S&P 500 lost 4% for the week through Friday's close.

If the bad news continues, there could be more damage in store for stocks.

"With no other financial or economic news this week, preannouncements will be the market's focus over the next few days," said Jay Meagrow, vice president of trading at

McDonald

. "They will be waiting to see what shoe drops, and from which sector."

There were more losses today for major companies that warned last week.

Nortel

(NOK) - Get Report

was off 10.3% to $8.85,

JDS Uniphase

(JDSU)

was behind 8.8% to $11.34 and

Nokia

(NOK) - Get Report

was another 0.5% lower to $22.38.

But investors were bidding up software giant

Oracle

(ORCL) - Get Report

ahead of its fourth-quarter earnings report, to be released after the closing bell. Back in March, the company

warned it would fall short of its prior earnings guidance for the fourth quarter. Oracle was up 0.3% to $15.04. The Dow Jones software index, which tracks the sector, was lately off 1.2%.

Merger Action

Much of early trading today was driven by merger-related news. The leading beef company in the U.S.,

IBP

(IBP) - Get Report

, was soaring 27.8% to $23.35 after Friday's ruling by a Delaware judge that

Tyson Foods

(TSN) - Get Report

must uphold its agreement to buy the company. In March, Tyson abandoned its deal to buy IBP for $3.2 billion, citing breaches of their merger agreement. Tyson was lately falling 18.3% to $9.31.

Cendant

( CD) was up 2.8% to $18.97 after it finalized a deal to acquire travel-reservations service

Galileo International

( GLC) in a $2.9 billion cash-and-stock deal. Galileo was up 4.3% to $31.08 after earlier hitting a new 52-week high at $31.35.

But a big corporate deal collapsed over the weekend when talks broke down between

Microsoft

(MSFT) - Get Report

and

AOL Time Warner

(AOL)

about integrating AOL's software into the new Windows. As it now stands, AOL software won't be incorporated into the operating system.

This morning,

Salomon Smith Barney

issued a cautious note on Microsoft, saying its June and September quarters may be at risk by 1 cent to 2 cents a share and a couple million dollars in revenue. The research firm cited weak capital spending and deterioration in Europe and Asia. Salomon reiterated its buy rating and $85 price target. Microsoft was lately down 1.5% to $66.98.

Chip, bank and retail stocks were higher. Oil stocks were slipping.

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