Dow Gains Nearly 300 Points; Techs Drag

Stocks rallied as investors breathed a triple-digit sigh of relief following news of a government bailout of Fannie Mae and Freddie Mac. But techs limped to the finish line amid nagging worries about the impact of a global slowdown on demand.

The U.S. government on Sunday seized control of Fannie Mae and Freddie Mac in what could be its biggest bailout ever. The CEOs of both companies were ousted and the Treasury is expected to put up as much as $200 billion for the rescue effort.

Stocks shot out of the gate following news of the bailout, but the air started to come out of the rally intraday as techs started to drag and investors worried that the bailout of Fannie and Freddie wouldn't fix the bigger problems in the housing and credit markets.

"This [bailout] gave a lot of the banks a nice boost but there wasn't really a broader impact as it does very little to change what's forced the market down in recent weeks, which is that economies are struggling not just in the U.S. but globally — this so-called demand destruction," said Marc Pado, U.S. market strategist and technical analyst at Cantor Fitzgerald in San Francisco.

A late-day rally in techs, financials and consumer-discretionary stocks helped put some of the air back in. The Dow Jones Industrial Average finished up 289.78, or 2.6 percent, at 11510.74. All Dow components but Alcoa finished higher. (Track the Dow 30 stocks.)

The S&P 500 and Nasdaq were also higher but the tech-heavy Nasdaq was the laggard of the three amid worries about the global slowdown on tech-product demand.

Trading was lighter than usual on the New York Stock Exchange, about 1.66 billion shares compared with the average of 1.9 billion. Nasdaq trading, however, weighed in at a hefty 2.57 billion shares compared with the average 2.17 billion.

Semiconductor stocks were one of the biggest drags on the Nasdaq after several brokerages downgraded their ratings on National Semiconductor based on the firm's lower profit and weak revenue outlook. NSM shed 1.3 percent.

Apple dropped 1.4 percent ahead of a highly-anticipated event on Tuesday. The speculation swirling around the market is that Apple will unveil new iPod Nanos, more storage on the Shuffle, possibly Bluetooth for some headphones and maybe even a deal with the Beatles. Sounds interesting but the fact that the stock is languishing today suggests that investors may have a case of Apple fatigue.

Research In Motion , maker of the rival BlackBerry device, dropped 4 percent.

Cisco jumped 5 percent, helping the Nasdaq claw out of negative territory, after Goldman Sachs said the networking-gear maker was one of its favorites in the tech sector.

Elsewhere on the Nasdaq, shares of UAL , parent of United Airlines, tumbled 11 percent to close at $10.92, after earlier confusion that resulted when a six-year-old Chicago Tribune report was republished on the Florida Sun Sentinel's Web site with a fresh datestamp, prompting false rumors that the company was again filing for bankruptcy. A giant trade briefly left the boards showing the stock down to one cent; that trade was later cancelled and the stock was actually halted at $8.97.

Financials leaped 4 percent, with sharp gains in companies that own a lot of Fannie and Freddie debt, including Bank of America and Citigroup , the top two gainers on the Dow at 7.9 percent and 6.6 percent, respectively.

That's what helped the Dow outperform the other major indexes today, Pado said, the fact that it's stacked with financials such as Bank of America, JPMorgan and Citigroup.

AIG , which owns a lot of Fannie and Freddie debt, wobbled a bit, but ended with a gain of 1.9 percent.

Homebuilders also rallied on the news as mortgage rates dropped, spurring hopes for an increase of buyers. Lennar , Pulte Homes and DR Horton all gained more than 10 percent.

Shares of Fannie Mae