NEW YORK — Stocks closed mostly higher yesterday after Federal Reserve Chairman Alan Greenspan said the economy has weathered the increase in oil prices "reasonably well.

Earlier in the session, stocks fell after consumer confidence hit its lowest point in two years, raising fears that U.S. shoppers might cut their spending and slow the economy.

But Greenspan calmed investors by emphasizing "the incredible resilience of the U.S. economy in terms of flexibility," said Lynn Reaser, chief economist for the investment strategy group at Bank of America.

Speaking to the National Association for Business Economics in Chicago, Greenspan emphasized that before policymakers respond to disasters, markets react through prices, interest rates and exchange rates, which work together to cushion the economy.

That was just what investors wanted to hear after the Conference Board said its consumer confidence index dropped even more than analysts expected, falling 18.9 points in September for a reading of 86.6, down from 105.5. Economists were expecting a reading of 98. With consumer spending driving the economy, the dive in sentiment after Hurricanes Katrina and Rita could dampen sales across the board.

The Dow Jones industrial average rose 12.58, or 0.12 percent, to 10,456.21.

Crude oil futures sagged. A barrel of light crude was quoted at $65.07, down 75 cents, in trading on the New York Mercantile Exchange.

Declining issues led advancers by roughly 9 to 7 on the New York Stock Exchange where consolidated volume was 2.03 billion shares, down from 2.07 billion at the same time Monday.