Dow Climbs, Nasdaq Ends Flat

Updated from 4:02 p.m. EST

Blue-chips managed to close slightly higher Monday, but tech stocks couldn't hang on to a late rally and ended essentially flat.

The Dow Jones Industrial Average ended with a gain of 38.75 points, or 0.4%, to 10,611.24. The Nasdaq shed less than a point at 1929.49, and the S&P 500 added 3.95 points, or 0.3%, to 1168.26.

The telecom sector remained high on investors' radar as the week got under way. Communications equipment maker Avaya (AV Quote) cut 1,900 jobs, widened its second-quarter loss forecast, and inked a deal to sell a minority stake to Warburg Pincus Equity Partners. The company said it now expects a second-quarter loss from ongoing operations of 6 cents to 10 cents a share and revenue between $1.24 billion and $1.28 billion. The previous estimate called for a loss of 8 cents a share. Avaya also agreed to sell 14.4 million common shares to Warburg Pincus at $6.26 a share. The stock closed down 5% at $5.95.

Elsewhere, shares of Qwest Communications (Q Quote) fell 2.6% to $9.46 after the company said it received an informal inquiry from the Securities and Exchange Commission into its accounting practices.

The semiconductor sector played host to a merger agreement, as Intersil (ISIL Quote) agreed to purchase Elantec Semiconductor (ELNT Quote) for about $1.4 billion in cash and stock. Separately, Intersil raised its first-quarter outlook. The company's stock was off 15% at $31.17, while Elantec was up 11% at $45.77.

Analysts at Sanford Bernstein issued negative comments on IBM (IBM Quote), downgrading the computer giant to market perform from outperform. The stock still managed to gain 15 cents to $105.24.

In the retail sector, department store chains Federated (FD Quote) and May Department Stores (MAY Quote) have held preliminary merger negotiations, according to a report in The Wall Street Journal. May lost 0.4%, but Federated tacked on 0.5%.

On the earnings front, home furnishings merchant Williams-Sonoma (WSM Quote) posted fourth-quarter earnings of $1.20 a share, a penny shy of analysts' expectations. But full-year earnings came in at the high end of guidance issued a few weeks ago. The company also said it expects a first-quarter profit of 3 cents to 4 cents a share. Shares dropped 5.4% to $46.40.

Consumer electronics retailer Circuit City (CC Quote) fell 6.7% to $19.15 after Barron's published a negative report alleging that 39% of the profits at its electronics group come from banking operations. As a result, the company could suffer from rising default rates, depending on the extent of the recession, the report contended.

U.S. government notes and bonds were mostly higher Monday afternoon, but the 30-year bond was ticking lower. Around 4 p.m. EST, the 10-year Treasury note was up 2/32 to 96 21/32, yielding 5.31%.

Overseas, stocks were lower with London's FTSE 100 down 0.5% at 5259 and Germany's Xetra DAX down 0.4% at 5341. Japan's Nikkei 225 rose 0.3% to 11,919, and the Hong Kong Hang Seng added 0.8% to close at 11,319.