Wall Street clawed back early losses in volatile trading on Tuesday after news of Warren Buffett's biggest takeover deal offset lingering concerns over the banking sector.
Financial stocks had led the market lower after UBS, Switzerland's largest bank, reported a larger loss than expected for the fourth quarter.
Lloyds Banking Group and Royal Bank of Scotland, the UK's two partnationalised banks, also announced that they were raising £54bn in an effort to appease European Union concerns about state aid.
Technology stocks also suffered after Morgan Stanley lowered its rating on the semiconductor industry from "attractive" to "cautious" and downgraded Intel, causing its shares to lose 2.7 per cent to $18.50.
"EPS, gross margins utilisation and growth metrics tell us that we are in the final innings of the semi cycle," Mark Lipacis, Morgan Stanley's chip analyst, wrote in the research note.
Inventory concerns also led the brokerage to cut its ratings on several of Intel's smaller rivals.
The market had been set for steep declines as a result but deal activity helped Wall Street to regain ground. Buffett's Berkshire Hathaway said it would acquire Burlington Northern Santa Fe, the second-biggest US railroad by revenue, for $26bn in cash and stock.
The deal valued Burlington Northern at $44bn, pushing its shares up 27.5 per cent to $97. Berkshire gained 1.7 per cent to $100,450. The takeover, which is the biggest acquisition made by Berkshire, prompted a rally in other US rail companies, pushing Union Pacific up 7.9 per cent to $59.41 and CSX up 7.3 per cent to $45.97.
Stanley Works was up 10.1 per cent at $49.69 after the tool supplier announced after the closing bell on Monday that it would buy Black & Decker for $3.46bn in stock.
Encouraging data on September factory orders also helped push stocks higher, lifting the market into positive territory and prompting a late recovery in financial stocks. After early losses, Bank of America closed 1.2 per cent higher at $14.80 while Citigroup gained 1.3 per cent to $4.04.
However, investors re-mained cautious before today's closing comments from the Federal Reserve's two-day policy meeting.
The S&P 500 finally closed 0.2 per cent higher at 1,045.41. The Dow Jones Industrial Average fell 0.2 per cent to 9,771.91 and the Nasdaq gained 0.4 per cent to 2,057.32.
"The downgrade on Intel is weighing on the market somewhat but the big story is Berkshire buying Burlington Northern," said Peter Cardillo, chief market economist at Avalon. "The M&A [activity] fortifies the notion that corporate America is feeling good about the prospects of economic growth next year and the factory orders were also another plus point for the economy."
Cognizant Technology Solutions also helped to mitigate losses in the technology sector after reporting better results than expected from the third quarter and raising its full-year profit forecast. Its shares were up 8.2 per cent to $41.97.
Synchronoss Technologies, the communications software maker, gained 12.2 per cent to $13.02 after posting a 34 per cent rise in quarterly earnings owing to strong demand from wireless carriers.
Viacom, which owns the MTV Networks and Paramount film studios, posted profits above expectations after video-game sales and box office hits including Transformers helped the company overcome a slump in advertising revenues. The shares gained 1.3 per cent to $30.17. A late recovery in oil prices also helped lift energy stocks into positive territory before the closing bell.
However, Johnson & Johnson weighed on the market after it announced a significant restructuring plan. The healthcare company said it would cut up to 7 per cent of its global workforce, or 8,000 positions, generating savings of between $1.4bn to $1.7bn in 2011. Its shares dropped 0.9 per cent to $58.93.
Ferro, which produces materials such as enamel and plastic compounds, fell 6 per cent to $5.60 after announcing the pricing of a common stock offering.