Stocks bounce back
Wall Street manages gains after a volatile session.
NEW YORK (CNNMoney.com) -- Stocks managed gains Monday, ending a volatile session higher, as investors looked beyond massive job cuts at Caterpillar and Home Depot among others and opted to scoop up stocks hit in last week's selloff.
The Dow Jones industrial average (INDU) gained 38.5 points, or 0.5%. The Standard & Poor's 500 (SPX) index added 4.6 points points, or 0.6%. The Nasdaq composite (COMP) added 12.2 points or 0.8%.
Pfizer's $68 billion buy of Wyeth lifted investor sentiment Monday, when it showed that deal-making is still happening even amid the recession. Better-than-expected readings on existing home sales and the index of leading economic indicators also helped lift stocks. But gains were limited after corporations announced more than 71,000 job cuts on Monday alone.
Stocks tumbled last week on poor earnings, continued problems for the bank sector and questions about when and how the new administration will be able to staunch the economic slowdown.
Those issued remained in place Monday, but stocks managed to seesaw to a higher point by the end of the session.
"There's nothing but bad news," said Dan Genter, president and CEO at RNC Genter Capital Research. "It's like we have a boat on fire and people are hoping that it keeps floating, even as we pour more kerosene on it each day."
Genter said the fourth-quarter earnings have been devastating as expected, but that investors have been taken by surprise by how aggressively companies have been cutting jobs in anticipation of worse results in the future.
However, he said that maybe it's better to get as much of the bad news out of the way up front, as it makes it more likely that the second half of the year could bring a recovery for stocks.
Year-to-date, the three major gauges are all down between 6% and 8%, as investors have scaled back after pushing stocks higher in December and the first week of January.
The selloff has been the process of the market trying to discount how bad things are going to get, said John Buckingham, chief investment officer at Al Frank Asset Management
"The health of corporate profits is in question, particularly when you see a day like today with so many job cuts announced," Buckingham said.
After the market close, Dow component American Express (AXP, Fortune 500) reported lower quarterly sales and earnings that missed expectations. Despite that, shares gained 3% in after-hours trading.
Also after the close, Texas Instruments (TXN, Fortune 500) said it was cutting 3,400 jobs due to weakening demand in a sluggish economy. Shares gained almost 5% in extended-hours trading.
Dow components DuPont (DD, Fortune 500) and Verizon Communications (VZ, Fortune 500) are expected to report quarterly results before the start of trade Tuesday.
Tuesday also brings the January consumer confidence index from the Conference Board, which is expected to hold steady at an all-time low of 38.0, unchanged from December. The S&P/CaseShiller home index for November is due as well and is expected to show steep declines.
The Federal Reserve begins its two-day policy setting meeting Tuesday, with an announcement expected Wednesday afternoon.
Pfizer-Wyeth: Drugmaker Pfizer (PFE, Fortune 500) is buying rival Wyeth (WYE, Fortune 500) in a $68 billion cash-and-stock deal that values Wyeth at almost 15% above Friday's closing price. Thousands of job cuts are expected to follow the completion of the deal. Pfizer also said it is cutting its dividend in half to 16 cents a share. Pfizer lost 10% and Wyeth lost less than 1%. (Full story)
Job cuts: Caterpillar, a Dow component, said it will cut 20,000 jobs, or 10% of its workforce due to the impact of the rough economic environment. Caterpillar also reported that fourth-quarter earnings tumbled 32% from a year ago. Caterpillar (CAT, Fortune 500) shares lost 8.4%.
Home Depot (HD, Fortune 500) said it was eliminating 7,000 jobs as a result of closing its high-end EXPO business and cutting its support staff. Shares gained 4.7%. (Full story)
Sprint Nextel (S, Fortune 500) said it will cut up to 8,000 jobs in the first quarter and take a charge of more than $300 million, as it contends with the sluggish economy. Shares gained 1.2%. (Full story)
In other company news, McDonald's (MCD, Fortune 500), a Dow component, reported weaker fourth-quarter earnings that were nonetheless better than expected. Shares rose less than 1%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by nine to five on volume of 1.27 billion shares. On the Nasdaq, advancers topped decliners 8 to 5 on volume of 1.87 billion shares.
Economy: December existing home sales rose by 6.5% from the previous month, topping forecasts, according to a report from the National Association of Realtors released Monday morning.
The median sales price plunged 15.3% from a year ago, the largest year-over-year decline since the NAR began keeping records and probably the largest drop since the Great Depression, Reuters reported.
The December index of leading economic indicators rose 0.3% in December after falling 0.4% in the previous month. Economists surveyed by Briefing.com thought it would fall 0.3%.
In Washington: The Senate is expected to meet Monday night to decide on Timothy Geithner's nomination as Treasury Secretary, with a vote scheduled for 6 p.m. ET.
Also this week, President Obama's $825 billion stimulus package is expected to be taken up in the House, amid opposition from several influential Republican lawmakers.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.66% from 2.61% Friday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.
Lending rates were mixed. The 3-month Libor rate increased to 1.18% from 1.17% Friday, according to Bloomberg.com. Overnight Libor fell to 0.23% from 0.24%. Libor is a bank-to-bank lending rate.
Other markets: In global trading, the Japanese Nikkei closed down 0.8%, while many other markets in Asia were closed for lunar new year celebrations. Most European markets rose in the afternoon.
The dollar fell versus the euro and the yen.
U.S. light crude oil for March delivery fell 74 cents to settle at $45.73 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery rose $13 to settle at $910.70 an ounce.
Gasoline prices fell three-tenths of a cent to a national average of $1.845 a gallon, according to a survey of credit-card swipes released Monday by motorist group AAA. 
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