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Stocks Ease Off Highs; 3M, Pfizer Advance

Stocks pared gains but remained solidly higher after a mixed batch of economic news, and as oil prices eased from recent highs.

TheDow Jones Industrial Averagegained more than 65 points continuing a turnaround that began Friday, afterstocks ended higher but still snapped a three-week winning streak.

The Dow is on track to rise 2.8 percent this month, following a 2.7 percent gain in January. Of the 26 times the Dow gained in the first two months of a year, only once has it finished the year with a loss.

Most Dow components gained, led by 3M , Pfizer and Hewlett-Packard , while Intel fell.

The S&P 500 and the Nasdaq also advanced. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 19.

All key S&P 500 sectors advanced, led by utilities, health care, and industrials.

The major indices started out strong Monday as oil prices eased in the wake of reassurances about supply from Saudi Arabia, and as St. Louis Federal Reserve President James Bullardtold CNBC there's no chance the Fed will end its program of stimulating the economy.

The positive tone extends moderate gains made Friday, which came after unrest in the Middle East sent stocks down to technically low levels earlier in the week. Buyers, however, stepped in at those lower levels and that buying continued into the start of a week.

"We saw a lot more buying on our desk than selling," Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.

Among the favored sectors were industrials and basic materials, Kruszenski said, adding there remains some wariness among investors about the effect of higher oil prices on gasoline prices, and eventually consumer spending.

M&A activity is also giving a boost to the market, he added, citing a nearly $5.8 billion deal among healthcare real estate investment trusts.Ventas' plans to buy rival Nationwide Health Properties in an all-stock deal.

Also in health care, Humana soared after it won back a multibillion-dollar contract that had been awarded to rival UnitedHealth Group. The benefits company raised its fiscal year outlook after the news, which came after it won an appeal to serve the Department of Defense's Tricare health system network.

Elsewhere, a JPMorgan fund is in talks to buy a 10 percent stake in privately-held Twitter,the Internet messaging site,for $450 million, CNBC confirmed.

Berkshire Hathaway's shares gained after Warren Buffett delivered upbeat words on the future of the American economy in a letter to shareholders. In the letter, Buffett said: 'My trigger finger is itchy' for major aqcquisitions. Stifel Nicolaus raised its rating on Berkshire to "hold" from "sell," and KBW raised the company's price target to $133,000 a share from $127,000.

Amazon.com slumped after UBS downgraded the Internet retailer to "neutral" from "buy" and cut its price target to $180 a share from $195. The brokerage said Amazon's plans to add prime video streaming will add costs. UBS also downgraded the tech sector to "neutral" from "overweight," but maintained Google as a "key call."

On the utilities front, Edison International led the sector, despite reporting a 22 percent drop in fiscal fourth-quarter earnings.

In other company news, shares of Europe's biggest bank HSBC, fell after the bank cut its profitability targetsdue to the cost of tougher banking regulation and disappointed investors with below-forecast 2010 earnings.

Blackstone rose slightly after Reuters reported the private equity firm won a contest to buy the U.S. shopping mall assets of Centro Properties in Australia with an offer of about $9.4 billion.

The dollar slumped against a basket of currencies, while gold, which continues to provide a safe haven for investors nervous about the Middle East, rose above $1,413 an ounce.

Reassurances from Saudi Aramco CEO Khalid al-Falih that extra supply needs had been metsomewhat eased investor concerns, although the potential effects of rising energy costs on the economic recovery remain worrisome.

Oil priceseased after the news, with the price of U.S. light sweet crude falling below $98 a barrel, and the price of Brent crude fall below $112 a barrel. Earlier, prices had risen as protests in Oman fueled wider concern about security of supply from the Middle East.

Late on Friday, J.P. Morgan upped its forecast for 2011 Brent crude by nearly 14 percent as supply tightens on lower Libyan output.

Other than oil prices, the big economic news of the week will be on Friday, when the nonfarm payroll report for February is released. Some economists surveyed by Reuters expect as many as 200,000 nonfarm payrolls were added in February, after January's disappointing addition of just 36,000 non farm payrolls, about 100,000 below expectations.

On Monday, the National Association of Realtors said pending home sales in January fell 2.8 percent, which was more than expected.

And consumer spending gained less than expected, rising only 0.2 percent in January, the Commerce Department reported. Economists surveyed by Reuters had forecasted spending would rise by 0.4 percent. Incomes, meanwhile, rose 1.0 percent last month, the largest increase since May 2009, while savings gained the most since August, rising to $677.1 billion from $620.9 billion in December

In a more upbeat sign, the Institute for Supply Management-Chicago purchasing managers index rose to 71.2 in February, its highest level since July 1988, a far better reading than the 67.7 estimate of economists surveyed by Reuters.

In Europe, shares closed higherin the wake of a bullish outlook for the U.S. by St. Louis Fed President Bullar. The FTSEEurofirst300 Index gained 0.8 percent.

On Tap Next Week:

MONDAY: Dallas Fed survey, farm prices; Boston Fed president Rosengren speaks.
TUESDAY: Auto sales, ISM manufacturing index, construction spending; Fannie/Freddie reform hearing before House financial services committee; and Bernanke's semi-annual report on monetary policy to Congress.
WEDNESDAY: Mortgage applications, Challenger job-cut report, ADP employment report, oil inventories, Federal Reserve's Beige Book; Atlanta Fed President Lockhart speaks; earnings before-the-bell from BJ's, Costco and Staples.
THURSDAY: Chain store sales, ECB announcement, Monster employment index, jobless claims, productivity and costs, ISM non-manufacturing index, natural gas inventories, money supply; Minneapolis Fed President Kocherlakota speaks, Atlanta Fed President Lockhart speaks; earnings before-the-bell from Heinz, Kroger; earnings-after-the-bell from Novell.
FRIDAY: Non-farm payrolls report, factory orders; Federal Budget Deadline.

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