Among Dow components, Boeing and General Electric slipped, while Alcoa and Intel gained.

The S&P 500 fell 0.24 points, or 0.02 percent, to close at 1,332.63, while the tech-heavy Nasdaq rose 2 points, or 0.07 percent, to close at 2,791.19. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.

Minutes from the Federal Reserve's last policy setting meetingreleased Tuesday afternoon indicated Fed officials had differing views over how long the Fed should maintain an easy monetary policy.

Some economists and strategists believe it's time for the Fed to put the brakes on its monetary stimulus program, or to even raise interest rates, because the economy is growing. Doug Cote, chief market strategist at ING Investment Management, said the economy is expanding, but, he says, "we think the Fed is OK in taking the go-slow approach, because there is so much slack in the economy."

That slack, including high unemployment, means wages are unlikely to go up, "so the Fed is safe in keeping rates low," Cote said.

Still, he expects the Fed's hand will be forced to raise rates in the second half of the year in the wake of rate hikes in Europe and China. Yet Cote said stocks will keep rising.

"We’re in an expanding economy driven by accelerating corporate profits, booming manufacturing, a resurgent consumer and growth from emerging markets," he said. "Because of that, we see equity markets continuing to go higher and they have compelling value right now."

M&A activity drove much of the market action on Tuesday, after Texas Instruments$6.5 billion cash bid for National Semiconductor appeared to lift tech stocks across the board. National Semiconductor shares soared more than 70 percent, as several brokerages raised their ratings and price targets on the stock. Meanwhile, Citigroup raised its price target on Texas Instruments to $42 a share from $39.

"We’ve been watching a lot of the tech stocks, they are obviously acting pretty well," said Peter Costa, president, Empire Executions, who said he was invested in both companies.

Otherwise, Costa added, the market has been making incremental moves amid "anemic" volume. "It's trying to find a direction and it hasn’t found it yet," Costa said.

Volume on the consolidated tape of the New York Stock Exchange was only 3.7 million shares, while 830 million changed hands on the NYSE floor.

Shares of most rival semiconductor firms gained amid speculation about further consolidation in the sector. The iShares PHLX SOX Semiconductor Sector Index Fund jumped. ON Semiconductor , Micrel and NetLogic Microsystems all advanced.

Intel also rose despite news that Canaccord Genuity lowered its price target for the chip maker to $19 a share from $22, citing a slowdown in the production of personal computers in the second quarter.

In other M&A deals, Diamond Foods rose more than 10 percent after news it has agreed to a $1.5 billion mergerwith Proctor & Gamble's Pringles. Shares of Procter & Gamble fell.

And Merck announced it would acquire eye treatment maker Inspire Pharmaceuticals for about $430 million to expand its ophthalmology business. Inspire shares soared more than 20 percent following the news.

Elsewhere in tech news, Dell rose, although Hewlett-Packard traded flat after Deutsche Bank cut its price targets on the tech giants to $18 from $20 and $40 from $42, respectively.

Ciena gained after news Bank of America Merrill Lynch raised its rating on the communications networking company to "buy" from "neutral."

Meanwhile, Cisco CEO John Chambers sent an internal memodefending the networking firm's strategy while acknowledging it has flaws in "operational execution" and a loss of accountability. The tech bellwether's shares still traded higher.

However Cree sank after Deutsche Bank cut the chip and LED company's price target to $45 a share from $55, and its rating to "underweight" from "equalweight," citing lower prices for its products.

Some portfolio managers needed to reconfigure their holdings Tuesday after news the Nasdaq OMX will rebalance the Nasdaq-100 stock indexon May 2, bringing the weighting of Apple down from about 20 percent to 12 percent.

Apple shares slumped less than 1 percent, after dropping more than 3 percent before the market opened. The index is widely followed by hundreds of funds, including PowerShares QQQ exchange-traded fund. Meanwhile, Deutsche Bank raised its price target on the iPad maker to $450 from $440.

One concern for investors are persistently high oil prices. London Brent crude rose to near 2 1/2-year highs to more than $122 a barrel, with continuing violence in the Middle East and North Africa supporting prices, while U.S. light crudeclosed just over $108 a barrel.

Major energy companies including ExxonMobil, Chevron and ConocoPhillips saw a boost following several analyst upgrades.

Shares of Southwest Airlines fell for a second day after the airline said it completed inspections of its older Boeing 737 planes, and held back five. Boeing also declined.

AMR's American Airlines said it has reached an agreement with travel website Expedia to restore its fares to the popular online travel agent after a dispute kept them off the site for months.

Walgreen gained after the pharmacy chain reported same-store sales rose 3 percent in March, which was more than expected.

Abercrombie & Fitch soared more than 10 percent after delivering a strong profit forecast for 2012 at its investor day. The teen retailer also expects its sales overseas will deliver strong growth.

Cubist Pharmaceuticals jumped almost 15 percent after the firm granted Teva Pharmaceutical a license to sell a generic version of its flagship infection-fighting drug, Cubicin, to settle a patent claim it filed against the generic drug maker.

In the U.S., Federal Reserve President Ben Bernanke suggested Mondaythat the Fed is not yet ready to start tightening monetary policy despite an improving economy. Bernanke said a recent rise in prices was driven by a spike in global commodity prices and was unlikely to persist.

In economic news, the Institute for Supply Management's indexof non-manufacturing activity fell to 57.3 in March from 59.7 in February, which was a five-year high. Economists surveyed by Reuters had expected the index would slip to only 59.5, according to the median forecast.

Also pressuring the markets was news in Europe that Moody's Investor's Service downgraded Portugal'ssovereign debt by one notch, reigniting fears that the country will need to seek a bailout. And in Asia, China's central bank boosted interest rates for the fourth time since October, a move designed to counter inflation, but is also expected to slow growth around the world.

European shares rose to a four-week closing high, led by the energy sector.