(

Updated from 4:07 p.m. EDT

)

Investors took a mid-summer break from selling technology stocks, but turned up the heat on some of their Old Economy counterparts.

After a session of clinging to some decent early gains, the

Dow Jones Industrial Average faded into the close, up 10.81 to 10,521.98, though well off its intraday high of 10,603. Meanwhile the tech-heavy

Nasdaq Composite Index was happily sporting a triple digit gain, on the heels of its 10.5% slide last week. The Comp gained 103.99 to 3766.99. The

S&P 500 was up 10.94 to 500.64, and the small-cap

Russell 2000 rose 10.42 to 500.64.

While no one was complaining about the action, hardly anyone was set to celebrate just yet. Skeptical market watchers chalked up the action as a natural response to last week's

slippage.

"The upside is really related to the fact" that last week's action was so weak, said Bill Schneider, head of U.S. equity block trading at

UBS Warburg

. "In one day, you don't make back the damage done in the entire last week."

John Bartlett, director of economic and market strategy at

Commerce Bank

in St. Louis, echoed the feeling. "I just think a lot of people really don't know what to believe. That is why you have these up and down days," he said. Bartlett said his firm still likes technology, "despite all the comings and goings," and has also focused on programmable logic stocks, such as

Altera

(ALTR) - Get Report

as well as analog device stocks, citing strong underlying demand in those areas.

Bartlett said his firm seeks to remain grounded and avoids getting swept up in the kind of rapid sector rotation that has characterized market activity of late. "We have a reasonably optimistic outlook. We hold the stocks that we like and let others trade them around."

On the bright side of today's unpredictable action, stocks were able to bounce back from a shaky downturn earlier this morning after a hotter-than-expected "prices paid" component in the July

Chicago Purchasing Managers' Index

(

definition |

chart ) pressured them into the red. The index fell more than expected, to 52 in July from 56.8 in June. But a sub-index measuring prices paid by Chicago-based manufacturers rose sharply, to 70 from 63.6. That's below its March peak, but still raises concerns about accelerating inflation, even in conjunction with slower economic growth

Most investors were relieved to see that today's dance in the red was brief. Technology stocks turned around, remained in the green for most of the day, and picked up some steam heading into the close. On the Nasdaq, fiber-optic stock

SDL

(SDLI)

was the top gainer, sailing up 26, or 8.1%, to 347 1/16, while

PMC-Sierra

(PMCS)

was second in line, up 16 5/8, or 9.4%, to 193 13/16.

Internet stocks were in rebound mode along with the Comp, with

TheStreet.com Internet Sector

index, the

DOT, up 27.19, or 3.9%, to 726.36.

The Dow did not end the day quite as strong, weighed down heavily by

Wal-Mart

(WMT) - Get Report

, which lost 6.1%, even as its tech components were showing some fire.

Amid talk that stocks were getting marked up because of end-of-the month portfolio showing -- which would undermine the significance of today's upside -- much of the near-term focus will shift to some key economic indicators for the rest of the week, including tomorrow's

National Association of Purchasing Manager's

report and Friday's

employment report

for a read on inflation signals.

Market Movers

FPL Group

(FPL) - Get Report

, parent company of

Florida Power & Light

, got whacked while

Entergy

(ENT) - Get Report

was higher after the two announced a $7 billion

merger. The combination would create the largest energy company in the U.S. FPL shares were recently trading off 8.6% and Entergy was up 2.5%.

Juno Online

(JWEB)

sprouted wings after it was

reported that

Time Warner

(TWX)

will allow the company to provide high-speed Internet services on its cable network. This marks the first time Time Warner has given an independent ISP access to its cable lines. Juno jumped 13.3% while Time Warner rose 1.7%.

Qualcomm

(QCOM) - Get Report

was climbing higher after it and

Ford

(F) - Get Report

were said to be planning a

joint venture that will deliver wireless services to cars. Qualcomm was recently up 4%, while Ford was up almost 1%.

Earnings Season Winds Down

The two fattest weeks for earnings are already past, but today saw several oil services and utilities companies report.

Baker Hughes

(BHI)

and

Union Carbide

(UK)

announced this morning, with Union Carbide reporting that it earned 94 cents a share vs. estimates of 85 cents.

Texas Utilities

(TXU)

reported earnings of 87 cents a share.

Market Internals

Breadth was negative on moderate volume.

New York Stock Exchange: 1,707 advancers, 1,158 decliners, 930.4 million shares. 77 new 52-week highs, 45 new lows.

Nasdaq Stock Market: 2,315 advancers, 1,747 decliners, 1.5 billion shares. 42 new highs, 152 new lows.

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Most Active Stocks

NYSE Most Actives

  • Lucent (LU) : 18.65 million shares.
  • Nokia (NOK) - Get Report: 17.8 million shares.
  • General Electric (GE) - Get Report: 17.19 million shares.

Nasdaq Most Actives

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Sector Watch

Retailers will be posting July

same-store sales Thursday, and the way investors have been treating the sector, you'd reckon they won't come in well. The

S&P Retail Index

was down 3.6%. For most retailers, the second quarter ends today. Earnings expectations for the period have steadily fallen on signs the economy is beginning to feel some of the

Fed's headwinds.

With same-store sales, some retailers will, inevitably, issue earnings warnings. That, too, may be damaging the sector today.

Transportation stocks came back on good strength in airlines. The

Dow Jones Transportation Index

rose 3.2%. Among the strongest were

Delta Air Lines

(DAL) - Get Report

, up 4.9%,

AMR

(AMR)

, holding group for

American Airlines

, up 5.4%, and

Southwest Airlines

(LUV) - Get Report

, up 6.6%.

Insurance sector stocks were higher, with the

S&P Insurance Index

up 1%. The insurers have been one of the few sectors performing well in recent weeks.

Some tech and telecoms that took big hits at the end of last week, were still in fairly good shape including telecom

Ericsson

(ERICY)

chip-technology firm

Rambus

(RMBS) - Get Report

,

Nokia

(NOK) - Get Report

and

Intel

(INTC) - Get Report

were rebounding. Intel split 2-for-1, which went into effect at this morning's open.

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Bonds/Economy

Treasuries are holding steady after falling modestly in the wake of today's only key economic release, the Chicago Purchasing Managers' Index. The index fell more than expected, to 52 in July from 56.8 in June. A sub-index measuring prices paid by Chicago-based manufacturers rose sharply, to 70 from 63.6.

The benchmark 10-year Treasury note lately was unchanged at 103 10/32, to yield 6.040%.

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International

European markets

finished the day higher.

In London investors remained somewhat cautious following Wall Street's fall on Friday and the

Bank of England's

Thursday meeting on domestic interest rates. But a late surge by

Vodafone AirTouch

(VOD) - Get Report

helped the market end on a positive note. The

FTSE

finished up 29.6 to 6365.3.

Other major European markets did better than that. In Paris, the

CAC

closed up 126.77, or 2%, to 6542.49. Frankfurt's

Xetra Dax

was up 102.77, or 1.4%, to 7231.07 in late trading.

The euro was lately trading higher at $0.9261.

Asian markets nose-dived overnight following the Nasdaq's hefty selloff Friday.

Japanese shares clawed out of a hole as the

Nikkei 225

index fell below a key psychological support level of 15,500 during the trading session. Overall, the Nikkei shed 111.08 by the close, or 0.70% to finish at 15,727.49.

The greenback edged slightly higher against the yen to fetch 109.50 in Tokyo trading. Many currency dealers say the dollar has a chance to climb to 112.00 over the next month or so, or as long as the stock market remains bogged down. The dollar was recently trading at 109.38 yen.

With rate worries fresh in investors' minds once again following the hotter-than-expected GDP in the U.S., Hong Kong's

Hang Seng

index dropped 342.95, or 2.0%, to 16,840.98 overnight. With the territory's currency pegged to the U.S. dollar, any rate rise stateside means higher rates at home.

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