U.S. retail sales for March shot up 0.8 percent, sharply higher than the forecast, pushing Procter & Gamble (PG.N) up 1.5 percent, while giving Wal-Mart Stores (WMT.N), the world's largest retailer, a 1.4 percent boost.

But Apple shares (AAPL.O) dropped 4.2 percent to $580.13. After a meteoric rise of 43 percent this year, Apple was ripe for profit taking.

Apple wasn't the market's only worry. Spain's rising borrowing costs and a weak New York state manufacturing report stirred concerns about Europe's debt crisis and the U.S. economic recovery.

"The market behavior is fairly manic today and investors are confused after a mixed set of data, Spanish yields, and momentum stocks like Apple losing ground," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"The confusion is leading to anxiety, and that's why we are seeing the blue chips, the large caps, outperform."

Other major drags on the Nasdaq included a slide of 9 percent in the shares of Mattel Inc (MAT.O), the world's largest toy maker, on declining quarterly sales, and a 3 percent drop in Google Inc (GOOG.O) shares ahead of a high-stakes legal battle with Oracle Corp. (ORCL.O)

The Dow Jones industrial average .DJI rose 71.82 points, or 0.56 percent, to 12,921.41 at the close. But the Standard & Poor's 500 Index .SPX inched down 0.69 of a point, or 0.05 percent, to 1,369.57. The Nasdaq Composite Index .IXIC dropped 22.93 points, or 0.76 percent, to close at 2,988.40.

Procter & Gamble, the world's largest household products company, closed at $66.78, up 1.5 percent, and helped bolster the Dow. Wal-Mart, another Dow component, ended at $60.58, up 1.4 percent.

Spain's 10-year government bond yields climbed above the 6 percent mark on Monday for the first time since the beginning of December. Spain has acknowledged that it has probably slipped into its second recession since 2009.

"Barring an accelerated flight of assets out of the euro zone and into U.S. equities, we see little reason for equities to rally appreciably above the most recent high," said Peter Cecchini, managing director at Cantor Fitzgerald in New York.

"Having said this, we are expecting a short-term bounce, which may lead to a retest of 1,400," he said.

Monday's mixed session followed last week's pullback, when both the Dow and the S&P 500 suffered their worst two-week percentage drops since late November on increasing concerns about the euro zone's debt crisis and weaker-than-expected U.S. economic data.

Earnings season will pick up steam this week, with 86 S&P 500 companies scheduled to report results. According to Thomson Reuters data through Monday, of the 34 S&P 500 companies to have reported earnings so far, 76 percent have reported earnings above analysts' expectations.

Mattel's quarterly profit fell short of analysts' expectations as price increases hurt sales of its iconic Barbie dolls and Hot Wheels cars, driving its stock down 9.1 percent to $31.01.

Google's stock slid 3 percent to $606.07 on Monday, when jury selection got under way in a high-stakes dispute over smartphone technology with Oracle Corp. Shares of Oracle (ORCL.O) gained 0.5 percent to $28.64.

Volume was light, with about 6.25 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

Advancers outnumbered decliners on the NYSE by a ratio of 17 to 13, while on the Nasdaq, about 13 stocks rose for every 12 that fell.

(Reporting by Angela Moon; Editing by Jan Paschal)

• A Permanent Economic Emergency