The Dow fell on Monday as uncertainty over the financial bailout package being discussed in Washington added to concerns about lacklustre earnings. The latest reading in a manufacturing index showed a smaller than expected decline, however, lifting beaten-down shares of technology companies that could benefit from any improvement in capital spending.
This pushed the Nasdaq up 1 percent while the S&P 500 index also edged higher. The economic stimulus plan approved in the US House of Representatives last week without a single Republican 'yes' vote faces hurdles as a revised version is discussed in the Senate. Investors are concerned over the content and extent of an approved plan."We still have a lot of things in Washington that are still unanswered; no one knows how the stimulus package is going to play out," said Warren West, principal at Greentree Brokerage Services in Philadelphia.
Adding to an already bleak earnings session, shares of Rockwell Automation were down 11 percent after the maker of systems to help factories run smoothly cut its 2009 profit forecast sharply.
But stocks in technology companies rebounded and the Nasdaq was positive, led by a 5 percent jump in Microsoft shares, following data that showed US manufacturing shrank in January but by less than expected. The Dow Jones industrial average shed 16.88 points, or 0.21 percent, to 7,983.98. The Standard & Poor's 500 Index edged up 3.33 points, or 0.40 percent, to 829.21. The Nasdaq Composite Index added 18.43 points, or 1.25 percent, to 1,494.85.
Rockwell Automated shares, down about 11 percent to $23.20, and Boeing, off 4.1 percent to $40.59, weighed on the S&P industrials index, the worst performing sector in Monday's session. Boeing was also one of the top drags on the Dow.
Top toy company Mattel Inc reported disappointing profits, and shares of the maker of the Barbie doll slid 15 percent to $12.07.
US President Barack Obama said in an interview with NBC it was likely that banks have not fully acknowledged all their losses and "some banks won't make it" through the crisis, and so financials also weighed down stocks.
Bank of America shares slid 7 percent to $6.12. The Nasdaq was led higher by big-cap tech companies including Microsoft, up 5.5 percent to $18.04, and Apple, which rose 1.3 percent to $91.29.
"We're getting a relief rally out of tech because tech is a big beneficiary of capital spending, particularly from the industrials," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.
"Because manufacturing did not shrink as bad as forecasted, companies themselves may loosen up their wallets a little more." The tech sector has been hard hit by worries it will be hurt by slower spending as consumers and businesses grapple with the recession.