Stocks Finish Higher, But Tech Stunts Rally
Stocks finished mostly higher following a choppy trading day, though weakness in tech companies and the financials thwarted a more substantial rally.
The Dow Jones Industrial Average staged a late rally to finish more than 0.5 percent higher, but the S&P 500 was flat and the Nasdaq extended Friday's selloff with a 0.6 percent drop.
Oil gave up more nearly $4 of its $11 a barrel run-up Friday on strength in the dollar. But the broader market could measure only modest gains.
"I think you'd have to put a little bit of a negative spin on this even with oil dumping four points," said Art Cashin, director of floor operations for UBS. "Oil is an important factor and I think one of the things keeping the market from being weaker than it is is a little bounce in the dollar."
Lehman Brothers led the fall in financials after the venerable investment bank said it will raise $6 billion in new capital. The company expects to report a $2.77 billion second-quarter loss.
Washington Mutual along with bond insurers Ambac and MBIAled the decline among financials, which sparked fears that the worst may not be over yet for the sector.
CIT Group , a commercial finance company hurt by debt issues, helped prevent a broader slide in the sector when it said it is getting a $3 billion cash infusion from Goldman Sachs, another loser for the day on the financials side.
The tech barometer was lower as Apple dropped more than 2 percent to kick off its annual developers' conference and CEO Steve Jobs unveiled the iPhone's second generation. The company slashed the price on the new phone to $199, sparking worries that it could impact Apple's revenue stream.
As Apple was falling, smartphone competitors Research in Motion, which makes the Blackberry, gained and Palm slipped.
Computer chip markers also were down broadly, led by Intel, following analyst downgrades of several companies.
The broader market was aided after the National Association of Realtors said pending home sales in April gained 6.3 percent. That came as a pleasant surprise considering that analysts were expecting the number to drop 1 percent.
Home builders gained across the board, led by Toll Brothers .
Analysts were expecting a continued pattern of choppy trading, with the Lehman news adding to a general sense of uncertainty about which way the market is heading.
Indeed, volatility has returned to the market, with the Chicago Board Options Exchange's Volatility Index above the watershed mark of 20, and up about 30 percent since May 15. Volatility lessened somewhat Monday, but analysts were expecting some unpredictable trading through the summer.
On the sales front, Dow component McDonald's said its same-store sales for May rose 7.7 percent helped by brisk business at is international locations. The fast-food giant, along with energy leader ExxonMobil led Dow gainers.
In deal news, Honeywell shares moved up after the company announced it would sell its aerospace fasteners distribution business to B/E Aerospace for 1.05 billion in cash and stock.
Leading fertilizer maker Potash continued its three-month rally, gaining 36 percent since its March lows and moving up Monday following an analyst upgrade.