Tech shares gain in choppy session

NEW YORK (CNNMoney.com) -- A tech rally lifted the Nasdaq Tuesday and helped the broader market stabilize, but gains were limited after profit warnings from a pair of retailers and a big drop in consumer confidences revived worries about the economic outlook.

Oil prices dropped below $80 a barrel. Gold prices dipped modestly. Treasury prices rose, lowering the corresponding yields. The dollar slumped against the euro anew.

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The Dow Jones industrial average (Charts) added a few points, while the broader S&P 500 (Charts) index ended little changed. The tech-fueled Nasdaq composite (Charts) added 0.6 percent.

Stocks had struggled through most of the session, before a tech rally in the last hour gave the market a boost through the close. Apple, Yahoo and Microsoft were among the big gainers.

Lowe's and Target both issued profit warnings, while homebuilder Lennar reported weaker earnings, reflecting the impact of the financial market turmoil that has kept Wall Street edgy for much of the summer.

Unsurprisingly, that turmoil was reflected in the September consumer confidence report released Tuesday, which showed a bigger-than-expected drop to 99.8, down from an upwardly revised 105.6 in the previous month.

Also influencing trade: surveys that showed that existing home sales fell to a 5-year low in August, while July home prices posted the biggest monthly drop in 16 years.

"I think we're still in a positive trend because of the Fed cut last week," said Dan Genter, president and CEO at RNC Genter Capital Management. "But the consumer is king and anything that hurts the consumer is going to have an impact on the economy and on stocks."

Consumer spending fuels approximately two-thirds of economic growth.

Stocks have been choppy so far this week, as investors have mulled disappointing company news and continued to wrestle with the implications of the Fed's decision to cut interest rates last week.

Wall Street breathed a sigh of relief after the Federal Reserve cut a key short-term interest rate by a half-percentage point, surprising many investors who expected a smaller cut.

"Stocks rallied last week on a knee-jerk reaction to the Fed," said Joseph Saluzzi, co-head of equity trading at Themis Trading. "Then there was a digestion over the weekend and now people are split into two camps, wondering if the half-point cut is going to keep us out of a recession or drive up inflation."

As a result of those concerns, the personal income and spending report at the end of the week, as well as the report's inflation component, the PCE, will be closely watched, Saluzzi said.

Other reports due later in the week include durable goods orders Wednesday and GDP and new home sales on Thursday.

In addition, the third-quarter earnings period is looming, although reports won't become more plentiful until mid-October.

"We're probably going to sit in a pretty narrow trading range for the next few weeks while we wait for the earnings to start coming in," Genter said.

Retailers were in focus Tuesday, with two major companies warning about profits.

After the close Monday, home improvement retailer Lowe's (Charts, Fortune 500) warned that fiscal 2007 earnings will come in at the low end or slightly below its prior guidance of $1.97 to $2.01 per share.

Lowe's shares slumped and dragged down rival Home Depot (Charts, Fortune 500), a Dow component.

Also late Monday, Target (Charts, Fortune 500) warned that September sales at stores open a year or more, a retail metric called same-store sales, will miss previous estimates.

Target's news weighed on rival Wal-Mart Stores (Charts, Fortune 500).

And in a reflection of the ongoing malaise infecting the housing market, builder Lennar (Charts, Fortune 500) posted a steeper-than-expected quarterly loss.

Investors were also keeping an eye on GM (Charts, Fortune 500), as it resumed contract talks with the United Auto Workers union one day after the UAW launched a nationwide strike against the automaker.

On the upside, Microsoft (Charts, Fortune 500) shares rose after the launch of its Halo 3 video game at midnight.

Separately, the stock continued to benefit from Monday's news that the technology leader is in talks to buy a stake in Facebook, a move that could value the social-networking site at up to $10 billion.

Other tech gainers included Apple (Charts, Fortune 500), Yahoo (Charts, Fortune 500), Adobe Systems (Charts) and Research in Motion (Charts).

Among other stock movers, Maxim Integrated Circuits (Charts) slid 2.7 percent, while InterContinental Exchange (Charts) jumped 6.6 percent, both in heavy trading due to changes in the benchmark S&P 500.

Maxim is being removed from the S&P 500 after the close of trading on Wednesday. The company is scheduled to be delisted by the Nasdaq around the same time. InterContinental is being added to the S&P 500 after the close of trading Tuesday, replacing First Data, which was taken private by Kohlberg Kravis Roberts.

S&P 500 changes typically spark heavy trading in the stocks that are being moved, since index fund managers must adjust their portfolios to accommodate the changes.

Market breadth was negative. On the New York Stock Exchange, losers topped winners by nine to seven on volume of 1.33 billion shares. On the Nasdaq, decliners beat advancers eight to seven on volume of 1.90 billion shares.

Treasury prices rose modestly, with the yield on the 10-year note at 4.63 percent, little changed from late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell against the euro and also inched lower versus the yen.

U.S. light crude oil for November delivery lost $1.43 to settle at $79.53 a barrel on the New York Mercantile Exchange.

Last week, the October contract settled at a record high of $83.32. However, the record price remains below inflation-adjusted highs hit in the early 1980s, which would be equal to at least $95 a barrel today.

COMEX gold for December delivery fell 50 cents to settle at $738.80 an ounce.