Mideast worries weigh on stocks, but techs rebound
AP Business WriterNEW YORK (AP) -- Worries about the escalating violence in the Middle East weighed on stock prices for much of the day Monday, but an afternoon rebound in tech stocks wiped out some of the losses. There were also more positive signs on the economic front.
According to preliminary calculations, the Dow Jones industrial average closed down 41.24, or 0.4 percent, at 10,362.70, recovering from an earlier deficit of nearly 140 points.
Broader stock indicators were mixed. The Standard & Poor's 500 index was down 0.85, or 0.07 percent, at 1,146.54, but the Nasdaq composite index rose 17.27, or 0.9 percent, to 1,862.62 as tech shares rose in the afternoon.
Stocks started off sharply lower on concerns about rising tension between Israel and the Palestinians. Israeli Prime Minister Ariel Sharon said Sunday night that Israel was "at war" and branded Palestinian leader Yasser Arafat "an enemy of Israel."
But several major tech companies rebounded in the afternoon on growing sentiment that the sector was close to bottoming out. Analysts said the market interpreted signs such as firmer prices for semiconductors as indicating that high-tech will benefit from the economic recovery.
"The market has a lot of support underneath because of the solid economics, plus there is evidence of solid pricing in semiconductor chips," Charles Pradilla, chief investment strategist at SG Cowen Securities.
"I think it was very impressive," Larry Rice, chief investment officer at Fahnestock & Co., said of the afternoon comeback. "I don't want to play down the events of the Middle East, but our market turned in a very strong closing. I think there's some indication that the tech stocks are bottoming out."
Investors originally brushed off reports released Monday morning that gave more positive signs about where the economy was heading. But by afternoon, the positive economic news appeared to be taking hold on investors.
The Institute for Supply Management, formerly the National Association of Purchasing Management, said its index of business activity rose to 55.6 in March from 54.7 percent in February. Analysts had been expecting a reading of 54.3. An index above 50 signifies growth in manufacturing.
Meanwhile, the Commerce Department said construction spending posted its biggest increase in a year in February -- 1.1 percent -- as builders took advantage of Americans' strong demand for new homes. The third straight monthly increase was larger than the 0.6 percent analysts expected.
Two downgrades of widely held stocks helped depress prices. Prudential Securities cut Ford to "sell" from "hold," and Merrill Lynch cut Wal-Mart to "buy" from "strong buy."
Both ended the day down. Ford closed at $15.77, down 72 cents or 4 percent. Wal-Mart, a Dow stock, was down $1.81, or 3 percent, at $59.49.
Other retailers also fell along with Wal-Mart, which reported that sales for the week ended Friday were below expectations, and Federated Department Stores said same-store sales for the week through Saturday were "not as strong as we had hoped."
Federated was off $1.54 at $39.31, and Sears Roebuck fell $1.02 to $50.25.
But several tech stocks rose back in the afternoon as sentiment improved for that sector. Leading semiconductor maker Intel was up 76 cents at $31.17, Cisco Systems rose 59 cents to $17.52, and Sun Microsystems gained 70 cents to $9.52.
Sierra Pacific Resources fell $5.98, or 40 percent, to $9.11 after Merrill Lynch and Goldman Sachs cut their ratings. On Friday, energy regulators granted about half the rate increases requested by Sierra Pacific's Nevada Power Co.
Declining shares outpaced advancing shares by 9 to 7 on the New York Stock Exchange, where volume came to 1.03 billion shares, down from 1.12 billion shares Thursday.
The Russell 2000 index dropped 1.96 to 504.50.
Overseas, Japan's Nikkei stock average rose 0.3 percent. European stock markets were closed for Easter Monday.
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