Updated from 4:07 p.m. EDT

A dip in oil prices helped blue-chip stocks stage an early afternoon rebound Monday for a small gain, while negative research calls on Intel ( INTC) and the chip-equipment space put the Nasdaq in the red for the third straight session.

The Dow Jones Industrial Average added 25 points, or 0.24%, to 10,238.22; the S&P 500 gained 1.54 points, or 0.15%, to 1114.35; and the Nasdaq closed down 9.41 points, or 0.48%, to 1936.92. The 10-year Treasury note traded up 3/32 in price to yield 4.44%, while the dollar dropped against the yen and gained on the euro.

Volume stayed relatively light, with just over 1.1 billion shares trading on the New York Stock Exchange, where advancers outnumbered decliners by about 5 to 4. On the Nasdaq, over 1.5 billion shares changed hands, and decliners held about a 3-to-2 majority.

In energy markets, oil fell in a choppy session. Nymex crude for August delivery lost 46 cents, or 1.1% to settle at $39.50, while gasoline futures fell 2 cents, or 1.6%, to $1.302 a gallon.

"It was encouraging to see the big rally early in the afternoon but still discouraging to see that the bulls were unable to make any further progress in the final 90 minutes of trading," said Ken Tower, chief market strategist with CyberTrader.

Tower said it's widely accepted that in a bullish market environment, the final hour of trading tends to be one of the best times of the day. "The fact that the bulls had a great rally in the mid-afternoon, that's nice," he said, "but it would've been really nice to see them be able to rally the market into the close as well."

However, "It must've been disappointing for bears as well," he added. "This was a day that you had some bad news come out and we got off to weak opening, so I would think anyone out there who's short is very unhappy. But is it bullish enough for buyers to get back in? I don't know."

IBM, which didn't report any significant news during the session but reports earnings Thursday, led the Dow's turn upward, closing up $1.06, or 1.3%, to $84.95, after losing 0.6% in the morning. Also, Caterpillar ( CAT) added $1.15, or 1.5%, to $78.23, and General Electric ( GE) ended up 43 cents, or 1.3% to $32.60.

Michael Sheldon, chief market strategist with Spencer Clarke LLC, said investors had IBM to thank for igniting the afternoon rally. He also pointed to strength in the banking sector as having an impact. The Amex Banking Index was up 0.6%.

"Most of the strength in bank stocks is probably related to a little bit better-than-expected earnings from SunTrust Banks ( STI), the first bank to start off the earnings season," Sheldon said.

SunTrust announced that second-quarter profits jumped 10% and beat estimates, thanks to strength in its consumer lending and asset management business. The company earned $364.8 million, or $1.29 a share, up from $330.4 million, or $1.17 a share in the same quarter last year.

The Nasdaq trimmed heavy losses after dropping more than 1% earlier but struggled under the weight of a lagging technology sector after Merrill Lynch downgraded of Intel to neutral from buy before the open. The brokerage cited nagging concerns about technology demand, a trend that loomed large in profit warnings last week from the likes of Siebel ( SEBL), PeopleSoft ( PSFT) and Veritas ( VRTS). It also cited Intel's valuation, which at Friday's close of $26.57 was about 22 times the 2004 Thomson First Call consensus and 18.5 times the 2005 consensus.

Intel, which is the focus of Tuesday's post-close earnings parade, closed down 33 cents, or 1.2%, to $26.24. Meanwhile, the Philadelphia Semiconductor Index was down 2.2% to its lowest levels of 2004.

Merrill also took an ax to the chip-equipment space and cut its forecast for 2004 semiconductor unit growth to 15% from 19%. The brokerage said lower demand for chips will mean lower demand for the equipment that produces them, and it could mean that most of the demand is met by the early part of next year. It sees industrywide revenue peaking in the first half of 2005.

Falling on the downgrade was Applied Materials ( AMAT), down 48 cents, or 2..6%, to $18.18 and ASML ( ASML), down 60 cents, or 3.6%, to $16.

Elsewhere, shares of DaimlerChrysler ( DCX) closed down 18 cents, or 0.4%, to $45.17 after the automaker announced that it might have to cut 6,000 jobs and shift production of some models out of Germany if labor unions oppose major cost-cutting initiatives.

Novellus ( NVLS) earned $37.8 million, or 25 cents a share, in the three months to June 26, up from $7.4 million, or 5 cents a share, last year. Excluding a major charge, the company earned 29 cents a share. Analysts surveyed by Thomson First Call had been forecasting 26 cents a share. Its stock closed down $1.33, or 4.3%, to $29.72.

Overseas markets closed lower, with London's FTSE 100 down 0.8% to 4360 and Germany's Xetra DAX falling 0.8% to 3893. In Asia, Japan's Nikkei fell 1.4% to 11,582, while Hong Kong's Hang Seng lost 0.1% to 12,191.

On Tuesday, the government is expected to report at 8:30 a.m. EDT that the U.S. trade deficit held steady in May at $28.3 billion. Then at 2 p.m, the government will release the federal treasury budget for June, expected to have a surplus of $16.3 billion, down from the $21.2 billion added in May.

Ahead of Intel's release, earnings are due out before the opening bell include Gannett ( GCI), Johnson & Johnson ( JNJ), Merrill Lynch ( ML) and Infosys ( INFY).