Blue chip stocks posted triple-digit gains while tech stocks ended lower amid worry over profits during an economic slowdown.
"The Dow has been pretty rock solid because it just doesn't have that much technology in it," James Mirsberger, a stock trader at Strong Funds, told S&P's AdvisorInsight.
On the heels of a tech thrashing Friday, Internet infrastructure firm Cisco Systems Inc. (CSCO) led the Nasdaq lower ahead of its earnings report on Tuesday. The tech-heavy index finished down 17.43 points, or 0.66%, at 10,965.85.
The focus in high-tech has been on semiconductor stocks, as an industry group reported Friday that several chipmakers are at risk of downward pricing on their products. Chip companies Intel (INTC) and Applied Materials (AMAT) led the Philadelphia semiconductor index down 4.1%. Between Friday's industry report and comments from a prominent Wall Street analyst, the semiconductor index has shed nearly 10% in the last two trading sessions.
"We had such a significant rally off of January lows without any change in fundamentals that ultimately we would suffer some profit taking" in semiconductor stocks, said Tony Dwyer, chief market strategist at Kirlin Holdings. He expects the weakness in semiconductor stocks will last a couple more days at most, since the market already understands that earnings are going to be poor within the sector.
"The real tell-tale sign of whether there's solid investing in the group is how it weathers this bout of profit taking," Dwyer said. "I think they will weather these lows."
Last week's 50 basis point interest rate cut makes for a full 1% easing in monetary policy so far this year. Investors are hoping for continued aggressive cutting as economic reports reveal more evidence of a slowdown.
So-called defensive stocks were popular amid tech fears. On the Dow, drug, oil, utility and financial services stocks were positive forces on the index. The blue-chip index soared 101.75 points, or 0.9%, at 10,965.85. The S&P 500, a broader stocks gauge, gained 4.84 points, or 0.3%, at 1,354.31.
Oil stocks ended up as Phillips Petroleum Co. (P), said Sunday it would buy refining and marketing company Tosco Corp. (TOS). The $7 billion stock deal is expected to make Phillips into a stronger integrated oil company.
The market is bracing for earnings reports from entertainment giant Walt Disney Co. (DIS), expected Tuesday and Cisco, slated for after the closing bell Tuesday.
U.S. Treasuries were trading higher in a flight to safety from stocks. Concerns about a slowing economy and lower corporate profits continue to weigh on investors.
Aiming to spark economic growth, the Federal Reserve has lowered short-term interest rates by 1% since the beginning of the year. Traders are expecting the Fed to keep cutting interest rates.
The latest report on the National Association of Purchasing Management's index of the non-manufacturing showed it fell to 50.1 in January from 61.1 in December, which is a record low. It should be noted that certain components within the index are not released on a seasonally adjusted basis.
Though economic data will be light this week, investors will be watching for fourth-quarter U.S. productivity and labor cost data on Wednesday.
Stocks in the News
Onshore drilling firm Patterson Energy (UTI) agreed to acquire UTI Energy (UTI) in a stock deal valued at $1.34 billion. The combined company would have 300 land-based drilling rigs in North America.
Soft drink and snack food giant PepsiCo Inc. (PEP) posted a 15% rise in fourth-quarter profits, boosted by earnings growth across its units, and said again that it sees double-digit earnings growth in 2001.
European markets finished mixed. London's FTSE 100 ended up 12.80 points, or 0.20%, to 6,269.20, as investors wondered whether Bank of England will cut rates this week. In Germany, the DAX Index finished down 10.13 points, or 0.15%, to 6,628.07, following reports that the EuroZone business climate index fell to a 12-month low and a survey of economic indicators survey fell for the 4th consecutive month. In Paris, the CAC 40 ended down 2.88 points, or 0.05%, to 5,823.49.
Asian markets finished lower. Japan's Nikkei index finished down 318.11, or 2.32%, at 13,385.52 while Hong Kong's Hang Seng stock index ended off 240.45 points, or 1.50%, at 15,830.84.
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