Stocks Finish with Modest Gains

Profit taking and possible electronic trading errors in the last hour of trading dented a rally fueled by positive earnings reports and merger news

After surging most of the day, stocks closed well off the best levels of the session on Monday with only modest gains amid a flurry of selling in the last hour of trading. Possible electronic trading errors on the "e-mini" contracts may have driven down prices late in the session, notes Standard & Poor's MarketScope. Positive earnings reports, an analyst upgrade of Dow industrials member Intel (INTC ), as well as continued merger and acquisition activity, lifted the market Monday.

The Dow Jones industrial average rose 57.5 points, or 0.63%, to 9,177.15. The broader Standard & Poor's 500 index increased 5.72 points, or 0.57%, to 1,003.86. Meanwhile, the tech-heavy Nasdaq composite index gained 20.89 points, or 1.2%, to 1,754.82.

Among the key events Tuesday are an update on retail sales and Federal Reserve chairman Alan Greenspan's testimony before the House Financial Services Committee.

Retail sales are expected to rise 0.4% in June, while the ex-auto component climbs 0.3%. The data are expected to be held back by the unusually wet and cool weather for much of the month, which is expected to weigh on demand for seasonal items. This data will provide a pulse reading on the economy, but reaction will be muted ahead of Greenspan's speech, says economic research outfit MMS International.

Well-known companies scheduled to release quarterly earnings Tuesday include Intel, Motorola (MOT ), Yum! Brands (YUM ), Johnson & Johnson (JNJ ), and Wells Fargo (WFC ).

On Monday, some big names in the financial sector reported better-than-expected results. Both Bank of America (BAC ) and Dow member Citigroup (C ) moved higher after beating second-quarter earnings per share estimates.

In biotech, Gilead Sciences (GILD ) rose after the company said it sees better-than-expected second-quarter earnings.

However, health insurer Cigna (CI ) was lower following the company's earnings warning for the second quarter that was announced after the market close Friday.

Meanwhile, news that Merrill Lynch upgraded Intel helped boost chip stocks. Reports of rising orders for chip-making tools also sparked gains in the group, notes Standard & Poor's MarketScope.

Some fresh merger news Monday also boosted investors' spirits. Yahoo! (YHOO ) announced it will acquire online paid-search provider Overture Services (OVER ) for about $1.63 billion. The deal gives Overture shares a takeover price of about $24.41 each, based on Yahoo's closing price Friday.

Office-supply retailer OfficeMax (OMX ) agreed to be acquired by Boise Cascade (BCC ) for $1.15 billion.

PeopleSoft (PSFT ) and JD Edwards (JDEC ) said Monday that antitrust regulators have approved their $1.75 billion proposed software merger, and that the deal will be completed as planned on Thursday.

Treasury Market

Treasury bulls lost their nerve ahead of Tuesday's retail sales data and Greenspan's monetary policy testimony. Fed watchers seemed to lean towards Greenspan favoring the positive economic developments over the deflation risks, which set up the market to fail today, says economic research outfit MMS International.

World Markets

European stock markets ended with solid gains. In London, the Financial Times-Stock Exchange 100 index was up 69.5 points, or 1.71%, to 4,127.6, with help from news that U.K. business confidence rose to the highest level in a year. Germany's DAX index, rose 69.56 points, or 2.09%, to 3,396.07, as U.S. stocks traded higher. In France, the CAC 40 index gained 51.96 points, or 1.66%, to 3,190.23.

Asian markets finished Monday's session with solid gains. Japan's Nikkei 225 index rose 1.2%, to 9755.63, although trading was light as market participants took a wait-and-see stance before Fed Chairman Greenspan's testimony Tuesday. Meanwhile, in Hong Kong, the Hang Seng index rose 2.1% to 10,122.

Before it's here, it's on the Bloomberg Terminal.