Business

Tue Jun 10 19:09:12 PDT 2008

NEW YORK (Reuters) –
The Dow staged a modest rebound on
Monday from Friday's nearly 400-point drop, as concerns about
consumer spending and the housing market were eased by
better-than-expected sales figures from McDonald's Corp and a
surprising gain in pending home sales.

The broader market was little changed, with a drop of more
than $4 in the price of oil helping fuel-dependent sectors such
as manufacturers, mitigating sharp losses in the financial and
technology sectors.

"I think the market is basically having second thoughts
about the horrible day we had on Friday," said Brian Gendreau,
investment strategist at ING Investment Management-Americas in
New York.

Financial shares were among the worst-performing sectors,
dragged down by Lehman Brothers, which forecast a $2.8 billion
second-quarter loss and unveiled a plan to raise $6 billion to
strengthen its capital.

Another damaging factor for both financial and home builder
stocks was a dramatic increase in expectations for
interest-rate increases later this year. Rate futures markets
tumbled as traders on both sides of the Atlantic capitulated to
central bankers' warnings that inflation is their central
concern, suggesting the era of low interest rates is near its
end.

Washington Mutual, one of the biggest U.S. residential real
estate lenders, fell 17 percent. Analysts at UBS see it
incurring losses of about $27 billion into 2011.

The Dow Jones industrial average was up 70.51 points, or
0.58 percent, to end at 12,280.32. The Standard & Poor's 500
Index was up 1.08 points, or 0.08 percent, at 1,361.76. But the
Nasdaq Composite Index was down 15.10 points, or 0.61 percent,
at 2,459.46.

The market got a boost early in the session after data
showed pending sales of previously owned homes unexpectedly
rose in April to the highest in six months as foreclosed
properties hit the market and sent prices down.

Shares of McDonald's, the world's largest restaurant chain
gained 4.1 percent to $59.31 after McDonald's said sales jumped
more than forecast at stores open at least 13 months. Other
consumer-related shares among the Dow's major advancers were
Wal-Mart, up 2.1 percent at $59.57, and Procter & Gamble, up
1.1 percent at $66.07.

Further boosting the Dow, Barron's said over the weekend
that aluminum producer Alcoa Inc shares could jump if higher
aluminum prices boost profits and if the company becomes a
takeover target.

Alcoa stock rose 7.5 percent to $42.17.

Apple Inc weighed on the Nasdaq after the computer maker
unveiled the widely anticipated new version of the iPhone with
faster Internet access, prompting investors to book their
profits on the stock, which is up more than 50 percent from its
lows of the year.

Apple stock fell 2.2 percent to close at $181.61.

Tech stocks may take their cues on Tuesday from Texas
Instruments Inc (TXN.N). The chipmaker on Monday narrowed a
quarterly earnings and revenue target range it issued in April
because of caution among its chip customers and weak demand for
high-end phones. Texas Instruments shares were unchanged in
extended-hours trading. In Monday's regular session, Texas
Instruments closed at $31.33, down 0.3 percent on the NYSE.

Financials were a drag on the S&P 500. Shares of Lehman
Brothers slid 8.7 percent to $29.48 while Washington Mutual
dropped 17 percent to $6.25. Other shares under pressure from
Lehman's woes were Morgan Stanley (MS.N), down 3.5 percent at
$39.39, and Merrill Lynch (MER.N), down 3.2 percent at $37.76.

Further weighing on the sector were remarks from Federal
Reserve officials that suggested persistent inflation pressures
may make it necessary to raise interest rates.

Dallas Fed President Richard Fisher told CNBC that global
inflation pressures are unlikely to go away. New York Fed
President Timothy Geithner, in separate remarks, said global
inflation risks will probably require tighter monetary policy.
Fed Higher interest rates are seen as negative for banking
shares.

A retreat of more than $4 in the price of oil failed to
dampen energy shares following Friday's nearly $11 spike in
crude's price. On Monday, U.S. crude for July delivery settled
at $134.35 a barrel, down $4.19 on the New York Mercantile
Exchange.

Shares of Exxon Mobil Corp shot up 2.6 percent to $89.07.

Volume was moderate on the New York Stock Exchange, where
about 1.35 billion shares changed hands, below last year's
estimated daily average of 1.90 billion. On the Nasdaq, about
2.13 billion shares were traded, below last year's average of
2.17 billion.

Decliners outnumbered advancers by about 2 to 1 on both the
NYSE and the Nasdaq.

(Reporting by Jennifer Coogan; Editing by Jan Paschal)

Source: Reuters