US stocks finished modestly higher yesterday, as investors tiptoed into the market, emboldened by Monday's hefty rally, but still hesitant amid an uncertain political and economic environment.

Worries about the prospect of war, the possibility of more terror attacks on the United States and their potential impact on already dwindling profits kept a cap on gains in major market gauges.

"There is some hope the economy will start to show some signs of rebound," said Mr Peter Gottlieb, a portfolio manager at First Albany Asset Management.

"But there is a lot more data that we are going to have to see. We are going into uncharted waters. We don't know what is going to happen on the political front. That's a level of uncertainty that is going to be overhanging the market for quite some time."

The market seesawed above and below the unchanged mark for much of yesterday's session, however, as investors mulled the potential for US military action in the Middle East and an already deteriorating picture for Corporate America.