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 US 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 aluminium producer Alcoa Inc shares could jump if higher aluminium prices boost profits and if the company becomes a take-over 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.
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, down 3.5 percent at $39.39, and Merrill Lynch, down 3.2 percent at $37.76.
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.
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