Blue Chips Slip

Updated from 4:11 p.m. EDT

The broader market held its ground Monday, rebounding from an early selloff amid a barrage of second-quarter earnings reports, but high oil prices and a disappointing outlook from 3M ( MMM) dragged the Dow lower.

The Nasdaq Composite -- which had earlier dropped below its lowest closing level of 2004, hitting 1873 -- reversed field in the afternoon and closed up 0.68 points to 1883.83. The Dow lost 45.72 points, or 0.45%, to 10,094.06, while the S&P 500, now well below its 200-day moving average of 1104, was down 0.48 points to 1100.91.

In other markets, the 10-year Treasury note was down 1/32 in price to yield 4.35%, while the dollar was higher against the euro and lower against the yen. In New York, oil for August delivery settled up 14 cents to $41.44.

The late-session rally helped boost trading volumes again, with over 1.3 billion shares trading on the New York Stock Exchange, where advancers held a 5-to-4 majority. On the Nasdaq, over 1.7 shares changed hands, and decliners outnumbered advancers by about 3 to 2.

Bill Livesey, market analyst with CyberTrader, said the Nasdaq was helped by a technical bounce off its 2004 lows, but he found little to be optimistic about. "I'm a little skeptical that this thing is going to have a lot of legs on the upside at this point in time," Livesey said.

Dow component 3M, closed down $4.79, or 5.4%, to $83.05, despite reporting that second-quarter earnings rose 20% to $773 million, or 97 cents a share, beating estimates by a penny. The rub came as the consumer products giant said third-quarter earnings will be roughly the same as second-quarter earnings, an estimate that would fall about a penny short of expectations. Second-quarter sales rose 9.5% to $5 billion.

After the bell, Flextronics ( symbol) said it turned a first-quarter profit after posting a loss a year ago. The electronics contract manufacturer earned $74.3 million, or 13 cents a share, up from last year's loss of $289.7 million. the company guided second-results in line with analysts' estimates. Its stock, which closed down 0.3%, was recently down $1.76, or 12.5%, to $12.30 after-hours.

Corning ( GLW)also said after the bell that it swung to a profit and raised expectations for third-quarter results. The fiber-optic cable maker earned $108 million, or 7 cents a share, up from last year's loss of $22 million, or 2 cents a share. The stock, which closed down 3.8%, was recently trading up 73 cents, or 6.5%, to $12 in after-hours trading.

In Iraq, militants killed a top official in Iraq's Defense Ministry Monday in a drive-by shooting as he walked into his house in Baghdad, according to the Associated Press. Separately, a fuel tanker detonated near a police station in southwest Baghdad early Monday, killing at least nine people and wounding about 57 others.

Back on Wall Street, the second week of the second-quarter earnings season began after the first week showed heavy losses in stock prices, confounding bulls who had hoped the reality of robust profit growth could take investors' minds off sore spots such as oil, interest rates and inflation. The Dow fell 0.6% over the previous five sessions.

The S&P 500 gave up about 1% last week, while the Nasdaq dropped 3.2% to 1883, leaving it 7 points above the 2004 low it set in May.

"There's just a lack of conviction on behalf of investors right now," said Joe DeMarco, head trader at HSBC Management, who pointed out that some negative outlooks for the future have investors on edge, despite the generally good performance of the second-quarter.

"There's about a third of the S&P 500 reporting earnings this week, so that'll give us a pretty good feel of the overall outlook for the next quarter," he said.

In other earnings news out Monday, Delta Airlines ( DAL) plunged further into financial crisis, swinging to a $1.96 billion loss thanks mainly to high fuel costs. It lost $15.79 a share, down from last year's profit of $184 million, or $1.40 a share, despite an aid package from the government. Its stock closed up 44 cents, or 8%, to $5.94.

Lexmark ( LXK) saying second-quarter earnings rose 35% from a year ago to $136.6 million, or $1.02 a share, beating forecasts by about a nickel. But the company forecast third-quarter earnings of just 90 cents a share, about 7 cents short of consensus estimates according to analysts polled by Thomson One Analytics, and the stock traded down about $6.38, or 7.1%, to $84.

Higher raw materials costs led Kraft ( KFT) to report a 26% decline in second-quarter earnings to $698 million, or 41 cents a share. Excluding a charge, the Altria ( MO) -controlled food company matched estimates for earnings of 46 cents a share.

Also, Wal-Mart ( WMT) reiterated its same-store sales forecast for July, growing in a range of 2% to 4%. It said initial measures of its back-to-school sales season are favorable. The stock closed up 21 cents, or 0.4%, to $52.86.

Overseas markets closed mixed, with London's FTSE 100 down 0.4% to 4321 and Germany's Xetra DAX losing 0.9% to 3813. In Asia, Hong Kong's Hang Seng rose 0.9% to 12,167, while Japan's stock market was closed for a holiday.

The earnings season continues Tuesday, with notables before the opening including Ford Motor ( F), Altria ( MO), Johnson Controls ( JCI) and Manpower ( MAN).

At 8:30 a.m. EDT, economists expect the government to report that housing starts in June increased by 23,000 on an annualized basis, while building permits fell by 97,000. At 2:30 p.m. EDT, Fed Chairman Alan Greenspan is scheduled to testify before the Senate Banking Committee on the state of the economy.

After the close, the earnings parade continues with Texas Instruments ( TXN), Motorola ( MOT) and Sun Microsystems ( SUN) among the bigger names.

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