Updated from 4:13 p.m. EST
A rise in tech stocks led the U.S. indices to a higher close Monday, offsetting more credit worries for insurers and finance companies.
opened lower but bounced back to gain 15.21 points, or 0.66%, to 2320.06. The advance came on the back of semiconductor names, including
After falling more than 100 points earlier, the
Dow Jones Industrial Average
turned higher and climbed 57.88 points, or 0.48%, to 12,240.01. The blue-chip average shook off an 11.7% drop in
, which fell after the insurer's auditors said the company has failed to accurately value some of its credit derivatives.
closed with losses on word that
Bank of America
will replace them as components on the Dow on Feb. 19. The move marks the index's first change in nearly four years.
also overcame a weak start and added 7.84 points, or 0.59%, at 1339.13.
Financial subsector indices were pressured by AIG's loss. The NYSE Financial Sector Index slid 1.4%, and the Nasdaq Financial 100 Index was down 0.9%. On the winning side, the Philadelphia Semiconductor Sector Index rose 1.6%.
"The negative information from AIG doesn't seem to have really spooked anyone," said Edgar Peters, chief investment officer with Pan Agora. "Hopefully this means that news of fresh subprime issues won't hurt the rest of the market."
A rise in oil futures benefited related stocks. The Philadelphia Oil Service Sector Index jumped 3.4%, thanks to sharp gains in
Crude oil added $1.82 to finish at $93.59 a barrel on threats from Venezuelan President Hugo Chavez that he would considering cutting off supplies to the U.S. Gold futures, meanwhile, gained $4.40 to $926.70 an ounce. The dollar was weaker against the euro and the yen.
Breadth was slightly positive to start the week. About 3.44 billion shares changed hands on the
, with advancers beating decliners by a 17-to-16 margin. Volume on the Nasdaq reached 2.04 billion shares as winners edged losers 15 to 14.
"Technically, I believe the market has entered the base-building phase," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Volume is lighter and breadth more subdued."
Paul Nolte, director of investments with Hinsdale Associates, said "sentiment remains fairly low and expectations about the future also remain dour. The short-term rally that broke the early-year selling last week quickly gave way to renewed selling this week. Revisiting the January lows, the market is on the precipice. It could turn higher, putting in at least a short-term bottom, or fall through the recently established bottom to push to new lows."
Among the early headliners,
$44.6 billion takeover offer as too low. Yahoo! closed up 2.3% at $29.87, and Microsoft fell 1.2% to $28.21. Following the close, Microsoft defended its approach, saying it was "offering shareholders superior value."
Elsewhere in the tech sector,
is in talks to join its wireless-infrastructure networks with
, according to a report in
The Wall Street Journal
. Motorola climbed 2.8% to $11.57, while Nortel was off 1.6% to end at $10.89.
Both the earnings and economic calendars were light to start the week. A few days out, earnings reports from
, among others, will come due.
On the economic front, releases on the U.S. trade balance, industrial production and capacity utilization, the government's report on retail sales, consumer sentiment and import prices will arrive later in the week.
Chairman Ben Bernanke will appear Thursday before the U.S. Senate committee on banking and housing to testify on the economy and financial markets.
Treasury prices reversed early losses and gained ground. The 10-year note was up 7/32 in price to yield 3.62%. The 30-year bond rose 9/32 in price, yielding 4.40%.
Overseas markets were uniformly lower. Hong Kong's Hang Seng slid 3.6%. Among European bourses, the London's FTSE 100 eased 1.3%, while both the Paris CAC 40 and Germany's Xetra Dax fell about 0.5%.