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Stocks Up Modestly; Energy, Materials Gain

Stocks gained Monday as investors digested strong earnings and economic news, but remained queasy about the events unfolding in Egypt.

The Dow Jones Industrial Average rose more than 25 points after gaining more than 40 points at the open. The more hesitant tone comes after the markets tumbled on Friday, as the Dow fell 1.4 percent and the S&P fell 1.8 percent, its worse decline since August 11.

Among Dow components, Alcoa and Travelers rose Monday, while Wal-Mart fell.

The S&P 500 and the Nasdaqadvanced. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell slightly under 20. The VIX had skyrocketed nearly 24 percenton Friday, its biggest daily spike since June 4.

Among key S&P sectors, energy, materials and financials gained, while consumerstaples fell.

Investors remained concerned that unrest in Egypt could spread to the rest of the Middle East, although analysts have said fears are already priced in after stock markets tumbled on Friday. Still, Moody's cut Egypt's credit rating, citing government spending in the wake of the crisis.

As stocks rose, the flight to safe-haven assets also eased. The price of gold fell below $1,330 an ounce and U.S. bond prices declined.

"I recognize that we had great news on Exxon, personal consumption, some M&A activity—those are all good reasons to be excited, but I think we need to treat with respect and some healthy caution some of the news coming out of North Africa and the Mid-East," John Lynch, chief equity strategist and Wells Fargo Funds Management Group, told CNBC as the market opened Monday.

The dollar, meanwhile, fell against a basket of currencies. Bond prices fell as investors took profits. Oil prices, meanwhile, subsided on Monday, as U.S. light sweet crude traded up only slightly, above $89 a barrel.

Energy stocks, however, advanced Monday in the wake of better-than-expected earnings from Exxon Mobil . The oil giant reported earnings of $1.85 a share, thanks in part to strong gains in natural gas production. Other natural gas producers also rose, including Chesapeake Energy, Devon Energy and EOG Resources.

Exxon is the first of the oil companies to report earnings this week. Anadarko Petroleum reports after the market closes, and BP reports earnings on Tuesday.

Meanwhile, Massey Energysoared more than 10 percent Monday after Alpha Natural Resourcesagreed to buy the rival coal producer for $7 billion.

The news lifted most stocks in the coal sector, including Arch Coal , International Coal Group , and Natural Resources Partners .

Intel shares resumed trading after they were temporarily halted before the chipmaker reported it was cutting its first-quarter sales forecastby $300 million to pay for a fix of a design problem in a recently released "support" chip. The total costs to repair and replace the chip is about $700 million, Intel said, according to Reuters.

In some cases the serial-ATA (SATA) ports within the chipsets may degrade over time, causing SATA-linked devices such as hard disk drives and DVD drives to malfunction, Intel said in a press release.

The news lifted shares of rival chipmakers, including Advanced Micro Devices .

Genzyme and Sanofi-Aventis reached an agreement in principal on a merger deal structure, according to two sources familiar with the situation, Reuters reported.

Dutch brewer and Japanese car maker Nissan have already said they will halt production in the country temporarily and the crisis will likely affect dozens of other companies.

Home Depotgained after Goldman Sachs upgraded the home improvement retailer to "buy," expected the company to outperform as it "delivers on well-articulated strategies to propel profitability," according to Goldman.

But Goldman cut rival Lowes to "neutral," citing limited upside for the company during a period of management transition in the wake of Larry Stone’s retirement as President.

Chrysler said Monday it would make between $200 million and $500 millionthis year, putting the bankrupt automaker in a position to go public before the year ends. Chrysler is currently controlled by Fiat Group SpA of Italy. The U.S. government also owns a 10 percent stake in Chrysler, which the government expect to relinquish when the automaker goes public.

In U.S. economic news, the Chicago Purchasing Managers Index, a gauge of mid-west manufacturing activity, rose to 68.8 in January from 66.8 in December, thanks to a boost in orders and stronger employment. The gain was more than expected.

And personal spending rose 0.7 percentin December, up from a 0.3 percent rise in November, for the sixth straight month of gains, the Commerce Department said Monday. Spending was expected to rise 0.5 percent according to economists surveyed by Reuters.

Meanwhile, personal income rose 0.4 percent, while savings dropped to $614.1 billion from $634.4 billion in November, the lowest level since March.

On Tap Next Week:

MONDAY: Atlanta Fed President speaks, farm prices; after-the-bell earnings from Baidu.com.
TUESDAY: Auto sales, ISM manufacturing index, construction spending; Earnings from BP, Pfizer, UPS, Aflac, Broadcom and Electronic Arts.
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, oil inventories; earnings from Marathon Oil, Mattel, NewsCorp., Visa and Yum Brands.
THURSDAY: Chain store sales, ECB announcement, jobless claims, productivity and costs, factory orders, ISM non-manufacturing index, Bernanke at National Press Club, Minneapolis Fed President speaks, Verizon begins iPhone pre-orders; earnings from GlaxoSmithKline, Merck, Royal Dutch Shell, Sony, Unilever, MasterCard and Sunoco.
FRIDAY: Nonfarm payrolls; earnings from Aetna.

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