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Dow rebounds with financials, cyclicals; Nasdaq slips

NEW YORK: US blue-chip stocks snapped back on Monday as Wall Street decided that economically sensitive shares were a bargain after last week's sell-off. The Nasdaq market, which had set a series of record highs recently, lost some ground for a change.

"I think we are just seeing one of those reversal days where things got so beat up that you are getting some bottom-fishing," said Harvey Hirshhorn, Stein Roe & Farnham's chief economist. "The tech names didn't do much. The question is whether this is sustainable or not."

The Dow Jones industrial average jumped 176.53 points, or 1.79 percent, to 10,038.65 after closing on Friday below the 10,000 mark -- for the first time since April 1999 -- on a 230-point plunge.

Despite Monday's rally, which saw the blue-chip index climb more than 294 points before dropping back, the Dow remains in correction mode with the index still more than 10 percent off its Jan. 14 high of 11,722.98.

Blue-chip strength came from the much-maligned "old-economy stocks" such as banks and retailers. Wal-Mart Stores Inc., the world's largest retailer, rose 1-11/16 to 45-13/16.

Among the Dow's large financial services companies, American Express Co. climbed 8-1/4 to 132-7/8 while Citigroup Inc. advanced 1-5/16 to 49-3/8.

The technology-stacked Nasdaq composite index, meanwhile, slipped 12.61 points, or 0.27 percent, to 4,577.89, despite crossing over into positive territory for part of the session. It is still up 12.5 percent for the year.

"The Dow is extremely oversold and the Nasdaq is coming off record highs," said Arnie Owen, the managing director of capital markets at Cruttenden Roth in Newport Beach, Calif., in explaining the divergence in the Dow and Nasdaq.

But the Standard & Poor's 500 Index, a broad market gauge, added 14.69 points, or 1.1 percent, to 1,348.05.

Goldman Sachs' Abby Joseph Cohen, one of Wall Street's most watched stock market strategists, said the index had been worn down enough as to be undervalued by 5 percent. For the year, the index is now off 8.3 percent.

"What you are seeing now is the buying of individual companies in the Dow for value," said Richard Babson, the chairman and president of Babson-United Investment Advisors, Inc. in Watertown, Mass.

"It is less a question of tech versus financial stocks and more a question of looking at specific companies. There is a continued expectation for higher interest rates," he said.

Blue chips performed well despite weakness in the bond market, where the 30-year US Treasury Bond fell 21/32 to yield 6.19 percent after consumer spending showed a sharper-than-expected gain in January. The yield closed at 6.14 percent on Friday.

Consumer spending rose 0.5 percent for the month to a seasonally adjusted rate of $6.53 trillion. Consumer incomes, meanwhile, rose by 0.7 percent to $8.053 trillion, outpacing spending, with some analysts saying the jump would mean Americans would have more cash to carry on a spending boom.

Wall Street is girding for the release this week of more important economic data that could help determine whether the US Federal Reserve will be aggressive in raising interest rates to cool the economy. Jobs figures for February are due out on Friday.

On the New York Stock Exchange, decliners edged out advances 1,492 to 1,467 with 1.03 billion shares changing hands. There were 34 stocks hitting new highs and 217 hitting new lows.

In general, it was comeback Monday for many of the market's most punished sectors with retailers, airfreight and financial services all climbing. Down sectors included drug retailers, computer makers and the usually supersonic biotechnology companies.

Oil companies' shares stormed higher as the price of a barrel of crude for delivery in April hovered around $30 a barrel. The Standard and Poor's international oil index rose 3.4 percent.

Speculation of deals between old and new economy players lit up various sectors. News Corp Ltd. rose 3-5/8 to 58-3/4 after the New York Times reported the media company is in discussions with Internet portal Yahoo! Inc. concerning an alliance that may include stock investments in each other's operations. Yahoo slipped 3-1/4 to 161-15/16.

In other deal speculation on the cyber front, Internet auction house eBay Inc. slid 5-3/4 to 145-1/16 even after saying it was not interested in buying the storied art auctioneer Sotheby's Holdings Inc., which is being investigated for price-fixing. Sotheby's was up 1-13/16 at 21-5/16.

The nation's second-largest retailer, Sears, Roebuck & Co., was up 1-5/8 at 27-5/16 after it linked up with a French retailer and Oracle Corp. to form a business-to-business online purchasing exchange. Oracle, the top mover on the Nasdaq, was down 2 at 68-5/8.

Utility holding company NiSource Inc. eased 2-5/16 to 13-1/4 after it said it would buy Columbia Energy Group. Columbia Energy rose 2-5/16 to 59-3/8.-Reuters