Stocks Perk Up

A strong dollar and weak oil spur buyers, but indices close well off session highs.
By Robert Holmes ,

Updated from 4:04 p.m. EST

Stocks staged a tepid rebound Monday, as a strong dollar and lower crude oil prices helped erase some of the gloom left over from another down week.

The

Dow Jones Industrial Average

added 42.78 points, or 0.4%, to 10,485.65, just its second gain in the past nine sessions; the

S&P 500

gained 2.86 points, or 0.2%, to 1174.28; while the

Nasdaq

closed 1.46 points, or 0.07%, higher at 1992.52, having lost most of its gain. The tech index last week closed below the 2000 level for the first time in almost five months.

Closing volume on the

New York Stock Exchange

was 1.67 billion shares, with decliners beating advancers by a ratio of 9-to-7. Volume on the Nasdaq was 1.48 billion shares, with advancers narrowly outpacing decliners by an 8-to-7 margin.

In other markets, the 10-year Treasury note was down 10/32 to yield 4.64%, a new eight-month closing high. The dollar climbed to a five-month high against the yen and euro.

"We're having a modest bounce from an oversold condition," said Paul Nolte, director of investments with Hinsdale Associates. "We're seeing more of a technical rebound, with investors getting more serious about short funds. Whether it continues remains to be seen. We're still stuck in the trading range started back in November."

Stocks briefly came off their highs at midday after reports that an earthquake measuring a preliminary magnitude of 8.7 struck off the coast of Indonesia's Sumatra Island, triggering evacuation warnings in coastal areas. An earthquake with a magnitude of 9.0 originated from the same fault line on Dec. 26, spawning a deadly tsunami that killed more than 175,000 people.

Oil futures eased again, partly because of the stronger dollar and partly on allayed concerns about the impact of last week's refinery explosion at a

BP

(BP) - Get Report

plant outside Houston. The May crude contract closed down 79 cents to $54.05 a barrel.

"I think today's gains are reasonably impressive without much volume," said Frank Husic, managing partner with Husic Capital Management. "The period from after Good Friday into early April is usually a poor time for the market. I think there's a real push and pull with the economy with strong corporate growth and powerful liquidity displaying itself in M&A activity. I think the market will meander over the next few days as a lot of players are away on holiday and with the big economic number coming at the end of the week."

"Certain stocks are in an oversold position, so people may be doing some bargain-hunting," said Robert Pavlik, portfolio manager with Oaktree Asset Management. "I'd be more hesitant to be a buyer at this level because we have the big employment report coming this Friday. The short-term traders are working today with lower oil prices and a higher dollar value."

The employment -- or nonfarm payrolls -- report will cap a busy week of economic reports. Economists expect a gain of 225,000 jobs, after a larger-than-expected increase in January.

Strong sectors Monday included semiconductors, transportation, retail and airlines. Weakening ones included energy, homebuilding and materials.

Drug distributor

AmerisourceBergen

(ABC) - Get Report

lowered its 2005 earnings guidance Monday, citing lower-than-expected inventory levels due to a changing sales model. The company expects to earn $3.10 to $3.50 a share, down from the previously expected $4 to $4.10 a share. Shares dropped $7.08, or 11.6%, to $54.03.

Hollywood Entertainment

( HLYW) fell after

Blockbuster

( BBI) said Friday that it was withdrawing its $14.50-a-share hostile takeover proposal. The move leaves Hollywood free to consummate its merger with

Movie Gallery

( MOVI), which previously agreed to acquire the video-rental chain for $13.25 a share in cash. Hollywood ended down 93 cents, or 6.6%, to $13.20.

Seven private equity firms are expected to announce a deal Monday to acquire business information and data-recovery outfit

Sungard Data Systems

(SDS) - Get Report

for $10.8 billion. The report in

The Wall Street Journal

sent Sungard shares up, closing $2.81, or 8.9%, higher at $34.36.

As many as 12 executives of

American International Group

(AIG) - Get Report

were subpoenaed by the

Securities and Exchange Commission

in an expanding investigation of the insurance giant's accounting, according to

The Wall Street Journal

. Shares of AIG added $1.41, or 2.5%, to $57.02.

Wal-Mart

(WMT) - Get Report

said Easter sales were lower than a year ago, while the launch of spring merchandise was delayed. The retailer, however, still expects sales growth in March to meet or surpass its forecast of 4.1%. Also, Wal-Mart director Thomas Coughlin resigned from its board after a company investigation into his use of gift cards and personal reimbursements. Shares gained 33 cents, or 0.7%, to $50.99.

Brookstone

( BKST) reported a fourth-quarter profit of $33.2 million, or $1.57 a share. Excluding lease accounting charges, the company would have earned $1.63 a share. Analysts expected earnings of $1.61 a share. Revenue increased 8.5% year over year to $237.8 million, narrowly beating the consensus of $237.6 million. Brookstone gave guidance for the first quarter in line with expectations. Shares rose sharply by $2.11, or 14.9%, to $16.30.

Drugstore chain

Walgreen

(WAG)

reported a fiscal second-quarter profit of $490.9 million, or 48 cents a share, from $431.6 million, or 42 cents a share, a year ago. Excluding gains from litigation settlements, earnings rose 15.1% to $487.9 million, or 47 cents a share, from last year's $423.8 million or 41 cents a share. Analysts expected earnings of 48 cents a share on revenue of $11.03 billion, according to Thomson First Call. Sales rose 12.3% to $10.9 billion from a year ago, while same-store sales rose 7.7%. Shares of Walgreen lost $1.12, or 2.4%, to finish at $45.11.

Sony

(SNE) - Get Report

said it was ordered by a federal court to stop selling its PlayStation consoles in the U.S. and pay $90 million in damages to

Immersion

(IMMR) - Get Report

. Immersion claimed that Sony infringed on its patented technology that makes a controller vibrate along to actions in video games. Sony said it would appeal the decision. Sony is allowed to keep selling PlayStations, as the order will not go into effect before the appeal. Immersion added 55 cents, or 9.6%, to $6.30, while Sony were unchanged to close at $41.16.

In brokerage action, UBS downgraded

General Motors

(GM) - Get Report

to reduce from neutral on concerns of the company's liquidity. Shares lost 93 cents, or 3.2%, to end at $28.37.

Prudential downgraded

Lucent Technologies

( LU) to neutral weight from overweight, citing slow growth because of rising competition and phone-company mergers. Shares fell 6 cents, or 2.2%, to $2.70.

Meanwhile, Piper Jaffray upgraded shares of video game retailers

Electronics Boutique

( ELBO) and

GameStop

(GME) - Get Report

to outperform from market perform. Electronics Boutique rose $4.47, or 10.5%, to $47.02, while Gamestop added 87 cents, or 3.9%, to $23.42.

Most overseas markets remained closed Monday for the Easter holiday.

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