The Dow ended higher, but the Nasdaq rally lost steam in the last hour of trading Monday. News that the U.S. Justice Department captured an known terrorist supposedly planning a "dirty bomb" attack temporarily put a damper on the buying mood, but then turned around.
The Dow Jones industrial average was up 55.70 points, or 0.58%, to 9,645.40, paced by gains in Wal-Mart (WMT ), Merck (MRK ), and 3M Corp. (MMM ).
The tech-heavy Nasdaq composite index declined 4.79 points, or 0.31%, to 1,530.69. And the broader Standard & Poor's 500 Index gained 3.21 points, or 0.31%, to 1,030.74.
The battered market was due for a bit of a bounce after being plagued by a crisis of confidence in light of the corporate and accounting scandals. The market got some support from Goldman Sach's Abby Joseph Cohen, who said Monday she sees profits for companies in the S&P 500 index increasing 12% in 2003 and the S&P 500 reaching 1,300.
Attorney General John Ashcroft announced Monday that Abdullah Al Mujahir, also known as Jose Padilla and a U.S. citizen, was arrested May 8 as he flew from Pakistan into Chicago O'Hare International Airport, according to the Associated Press. The alleged al Quaeda terrorist was plotting to build and detonate a radiological bomb and is now in the custody of the U.S. military and being treated as an enemy combatant, according to press reports.
Among sectors on the move, general merchandise retailers were higher after Wal-Mart projected that June same-store sales will hit the high end of estimates. Advertising stocks gained after Morgan Stanley upgraded the group to attractive and said it expects large-cap agencies' fundamentals to strengthen in the second half of 2002.
And casino stocks rallied after CIBC World upgraded Mandalay Resort Group (MBG ), on the premise that the recent sell-off in response to pending legislation in Illinois has created an attractive valuation.
Among stocks on the move, Tyco International's (TYC ) legal problems are leading to closer scrutiny of its balance sheet and growing concern that the conglomerate could face a financial crunch, reports the Wall Street Journal. The stock rebounded Monday after skidding 30% Friday to a fresh low of $10.10.
In merger news, BAE Systems reportedly says it is in talks with TRW Inc. (TRW ) about expanding its defense business in North America. Northrop Grumman (NOC ) has aleady offered $6.7 billion for TRW, and is considering whether or not to raise that offer.
Electronic securities-trading company Instinet Group (INET ) says it will acquire rival Island ECN in a $508 million deal.
News Corp. (NWS ) and Vivendi Universal (V ) have inked a pact whereby a group of investors headed by News Corp. will buy Vivendi's Italian pay-TV business for total of about 1 billion euros.
And in the ongoing investigation of energy traders, El Paso (EP ) says it received an informal inquiry from the SEC staff regarding so-called round-trip trades.
Williams (WMB ) lowered its 2002 earnings per share forecast to between $1.35 and $1.70 from $2.15 to $2.30. The company says it will reduce its financial commitment to the energy risk management business amid the uncertain industry environment.
Treasuries were mostly higher as the Nasdaq lost ground and investors sought safety. While the capture of the terrorist suspect is good news, the market remains very jumpy over the prospect of event risk, says S&P MMS. The Treasury market will remain focused on stocks and geopolitical developments Tuesday amid a lack of data.
On the economic front, there are no reports scheduled until Wednesday's release of U.S. export and import prices for May. The key reports this week are on Thursday, which include U.S. retail sales for May and the producer price index (PPI) for May, an important gauge of inflation at the wholesale level.
European markets were mixed. In London, the Financial Times-Stock Exchange 100 index ended with a gain of 7.80 points, or 0.16%, to 4,928.20, although Abbey National was down after saying it would miss earnings expectations. There was little reaction to a report that UK PPI rose 0.3% in May.
In France, the CAC 40 was up 4.67 points, or 0.12%, to 4,024.94. And in Germany, the DAX Index was down 20.92 points, or 0.45%, to 4,589.26, after a report that German retail sales fell 2.4% in April restrained many traders who are uncertain about the economy.
In Asia, the markets finished mixed. The Nikkei fell 68.32 points, or 0.60%, to close at 11,370.21 points, led by exporter shares on renewed concerns over U.S. corporate earnings after the poor earnings guidance from Intel last week. A higher-than-estimated increase in Japan's April Machinery orders was offset by the bleak market sentiment.
In Hong Kong, the market gained 4.13 points, or 0.04%, to close at 11,288.84.