Dow Posts Modest Gain, but Nasdaq Slips - TheStreet

Updated from 1:14 p.m. EDT

Blue chips closed moderately higher in an abbreviated session Thursday, but tech shares stumbled as a steep drop in


(NVDA) - Get Report

dragged down the chip sector.


Dow Jones Industrial Average

rose 73.03 points, or 0.7%, to 11,288, and the

S&P 500

was higher by 1.38 points, or 0.1%, at 1262.90. The


gave back 6.08 points, or 0.3%, to 2245.38.

Stocks initially took a hit after the Institute for Supply Management's June services index came in at 48.2, down from 51.7 for May and falling short of economists' prediction of 51. The number indicates a contraction in purchasing and supply activity in the service sector. Traders sold off stocks on the news, but the indices rebounded from their lows just as quickly.

Investors largely shrugged off a sixth consecutive monthly decline in nonfarm payrolls. The Labor Department reported that the

U.S. shed 62,000 workers

last month, a figure that was roughly in line with the consensus target for a drop of 55,000. The unemployment rate stayed at 5.5%, whereas a downtick to 5.4% had been expected.

At the same time, the data for the prior two months were revised lower by a combined 52,000 workers. A separate report showed an increase in weekly initial jobless claims to 404,000.

Despite the uninspiring jobs news, investors opted to bid equities higher at the start of the session. Trading ended at 1 p.m. EDT, and U.S. exchanges will be closed Friday in observance of Independence Day.

Some market observers have blamed low trading volume for the market's severe reactions to recent data releases. Volume has been generally lower lately, says Doreen Mogavero, president and CEO of Mogavero Lee, but Wednesday's selloff occurred on volume of about 1.5 billion shares on the

New York Stock Exchange

, a number she considers "average."

"The market is in a downtrend, and I don't think we should ignore it on low volume," Mogavero wrote in an email. "Sentiment is more important in this scenario than volume, and sentiment is not good. In this market when things stay the same instead of getting worse people are happy with that."

Today's action may amount to noise, said Bill Fleckenstein, president of Fleckenstein Capital Management. "It's not really a great idea to make too much out of any one given day." He said that, on thin trading days, quantitative trading strategies further blur the market's short-term moves.

"A lot of people are dying to make the case that a) the market is making a bottom and b) oil is making a top. You can see, every time oil backs off a little bit, they're trying to make the bet," Fleckenstein said.

Elsewhere, crude oil remained one of the stories of the week. Lately, the near-month contract was up 97 cents at $144.54 a barrel after earlier passing the

$145 mark

for the first time in history. A weak dollar, ongoing fear of an Israeli conflict with Iran and yesterday's report of lower-than-expected U.S. crude inventories have contributed to oil's recent rise.

The average price of gasoline at the pump rose to $4.098 a gallon from $4.092 one day ago. Gold was down $12.90 at $933.60.

Outside the U.S., the European Central Bank, as expected, raised its benchmark lending rate by a quarter-point. Even so, the dollar rose against the euro and its other major competitors. The dollar index, which measures the U.S. currency against a basket of foreign counterparts, was up 1% at 72.74.

As for companies, Citigroup said that


(UBS) - Get Report

is set to write down $6.9 billion in assets and will need to raise fresh capital. UBS had said Wednesday that it would not require additional liquidity. Shares climbed 2.5% to $20.32.

Elsewhere among the financials, mortgage insurer

Freddie Mac


said it probably won't be raising capital before it reports second-quarter earnings in mid-August. Freddie also announced that the 30-year fixed mortgage rate fell to 6.35%. Shares slumped 8.9% to $14.50.

In the technology space,

The Wall Street Journal

reported that Internet company



is in talks with

Time Warner


about signing a deal with that company's AOL unit.

On Wednesday, the


reported that


(MSFT) - Get Report

was still interested in finding a way to gain control of Yahoo! after a failed bid earlier this year. Yahoo! shares ticked up 2.3% to $21.35.

Nvidia was one of the primary culprits in keeping the Nasdaq under water. Following the previous close, the semiconductor maker offered a

gloomy second-quarter forecast

owing to flaws in some of its microchips. Shares lost 31% to $12.49. Dow component and fellow chipmaker


(INTC) - Get Report

was trading down, as well.

Turning to the mining companies, Citigroup upgraded

Arch Coal

(ACI) - Get Report


Peabody Energy

(BTU) - Get Report

to buy from hold. The two names were hammered Wednesday. Arch ended up 2.4% at $63.70, but Peabody closed down slightly at $77.62.

In the pharmaceutical area,

Abbott Laboratories

(ABT) - Get Report

last night got Food and Drug Administration approval for a drug-eluting stent, sending shares up 1.3%. Also in the sector,


(SNY) - Get Report



(GSK) - Get Report



(AZN) - Get Report

aided a rally.

Health services stocks weren't faring as well.


(UNH) - Get Report

announced yesterday that it would cut 4,000 jobs. Shares tumbled 8.6% to $22.96.








(CI) - Get Report

all sank on the news.


Penn National Gaming

(PENN) - Get Report

was the beneficiary of a canceled $6.1 billion buyout deal with Fortress Investment Group and Centerbridge Partners. The gaming company announced it would receive about $1.48 billion as a result of the scuttled agreement. It closed up 3.7% at $29.66.

Treasuries were falling. The 10-year note was down 3/32 in price, yielding 3.97%, and the 30-year was down 13/32, yielding 4.53%.

Overseas, European markets were higher. The FTSE of London was up 0.9%, and the DAX of Frankfurt gained 0.8%. In Asia, the Nikkei in Japan and Hong Kong's Hang Seng fell.

In terms of breadth, decliners led advancers 5-to-4 at the New York Stock Exchange, on volume of 931.9 million shares, and down stocks outpaced up stocks 2-to-1 on the Nasdaq on volume of 1.41 billion shares.