Stocks muster gains

Wall Street ends a volatile session with a modest advance as investors mull the latest profit reports. New home sales beat forecasts.

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By Alexandra Twin, senior writer

Has the recession caused you to change your spending and saving habits?
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NEW YORK( -- Stocks ended higher Monday, at the end of a choppy session on Wall Street in which investors weighed better-than-expected results with some wariness after a two-week rally.

The Dow Jones industrial average (INDU) added 15 points, or 0.2%. The S&P 500 (SPX) index climbed 3 points, or 0.3%. The Nasdaq composite (COMP) gained 2 points, or 0.1%.

In the last two weeks, the Dow and S&P 500 have both gained more than 11% as investors welcomed better-than-expected results. After such an advance, stocks were mixed Monday.

Worries about the economy in the wake of a dour June jobs report dragged on stocks in early July, with investors betting that second-quarter results would disappoint, said Ron Kiddoo, chief investment officer at Cozad Asset Management. But the reports so far have been largely better than expected and stocks have rallied in response.

"Even if it's mostly just cost cutting that's driving the earnings, people are relieved," Kiddoo said.

So far, reported earnings are beating expectations by 77% versus the long-term average of 61%, according to earnings tracker Thomson Reuters. But only a little more than one-third of the S&P 500 companies have reported so far. This week brings the biggest batch of corporate results yet, with 146 of the S&P 500 companies due to release results.

A better-than-expected new home sales report seemed to have little impact on the broad market, although it did lift housing stocks, with the Philly Housing index climbing 2%.

"We've had a terrific rally, so it's not surprising that we're not seeing a big reaction to the housing number," said Michael Church, president at Addison Capital.

He said that, looking forward, the stock market can probably keep grinding higher, and that the economic data will continue to support that move.

Tuesday brings the July reading on consumer confidence from the Conference Board and the S&P/Case-Shiller Home Price index

Corporate results: Monday brought quarterly results from a number of companies, including Dow component Verizon Communications (VZ, Fortune 500).

Verizon reported weaker earnings and stronger revenue, both of which were in line with estimates. But the telecom also said it was cutting 8,000 jobs in its wireline business, due to the impact of the recession.

Shares of the Dow component fell 1.6%.

Honeywell (HON, Fortune 500) reported weaker earnings that met estimates and weaker revenue that missed estimates. The aerospace and transportation manufacturing giant also warned that 2009 earnings and sales will come in at the low end of its previous forecast. Shares ended the day modestly higher.

RadioShack (RSH) reported higher quarterly earnings that topped estimates, thanks to lower costs and better sales of netbooks, prepaid wireless handsets and digital televisions. However, investors took a "sell the news" approach, sending shares 6.6% lower.

Aetna (AET, Fortune 500) said its profit slumped due to higher medical expenses. The health insurer reported weaker earnings that missed estimates on higher revenue that topped estimates. Aetna also cut its 2009 profit forecast. Shares fell 2.7%.

Other movers: A variety of bank shares rose, including Wells Fargo (WFC, Fortune 500) and Dow component Bank of America (BAC, Fortune 500). Regional banks surged too, including KeyCorp (KEY, Fortune 500), Regions Financial (RF, Fortune 500) and Fifth Third Bancorp (FITB, Fortune 500).

The KBW Banking (BKX) index rallied 3.1%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by almost two to one on volume of 1.04 billion shares. On the Nasdaq, advancers beat decliners five to four on volume of 2.16 billion shares.

Economy: New home sales in June rose to a 384,000 unit annual rate from a revised 346,000 unit annual rate in May. Economists surveyed by expected 352,000. However, sales fell 28% versus a year ago. (Full story)

Reports are due later this week on durable goods orders, jobless claims, manufacturing and GDP.

Economists expect that second-quarter GDP shrank at a 1.5% annualized rate after shrinking at a 5.5% annualized rate in the first quarter.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.72% from 3.66% late Friday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, European and Asian markets ended higher.

In currency trading, the dollar fell against the euro and gained against the Japanese yen.

U.S. light crude oil for September delivery rose 33 cents to settle at $68.38 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rose 40 cents to settle at $954.20 an ounce. To top of page

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