Stocks Ease Higher in Quiet Session

NEW YORK (TheStreet) -- The Dow Jones Industrial Average wavered in the final hour of trading but still managed to finish Monday with a gain for the first time since May.

Investor optimism stemming from last week's better than expected jobs report carried over into Monday's quiet session with traders getting no new domestic economic data to chew over and few earnings headlines to key on as second-quarter reporting season winds down.

The Dow closed up more than 21 points, or 0.16%, at 13,117.51, sliding back after running as high as 13,187 earlier in the session. Thanks to Friday's mega-rally after nonfarm payrolls increased by 163,000 in July, the blue-chip index is riding a four-week winning streak, its longest since a five-week stretch of gains in October 2011.

Nineteen of the index's 30 components finished in the green with Bank of America ( BAC), Cisco Systems ( CSCO) and Hewlett-Packard ( HPQ) leading the way.

Dow decliners included American Express ( AXP), Home Depot ( HD) and Johnson & Johnson ( JNJ).

The S&P 500 rose more than 3 points, or 0.23%, to close at 1394. The index rose as high as 1399.63, stalling out just below 1400, a level it hasn't reached on an intraday basis since May 3.

Basic materials, consumer cyclicals and technology were the strongest sectors in the broad market, while consumer non-cyclicals, transportation and utilities were weak spots.

The Nasdaq was the big winner, advancing 22 points, or 0.74%, to settle at 2990. The tech-heavy index topped out at 3000.24, breaking above that level on an intraday basis for the first time since May 4. Apple ( AAPL) rose 1.1% to finish at $622.55.

Winners outpaced losers by a roughly 2-to-1 ratio on the New York Stock Exchange and 1.5-to-1 on the Nasdaq.

Paul Nolte, managing partner at Dearborn Partners, cautioned investors this rally hasn't been confirmed by heavy trading action as global slowdown fears persist.

"If the daily volume traded measures excitement for the market, there remains little euphoria for stocks at this point ... Friday's huge rally on the employment report was more of an outlier as volume actually contracted by 10%," he said.

Monday saw 3.10 billion shares changing hands on the New York Stock Exchange and 1.53 billion shares traded on the Nasdaq.

Economists at Capital Economics argued Monday that there is still enough impetus for the Federal Reserve to provide additional monetary stimulus in the coming weeks to support the economy -- most likely with a third round of asset purchases when policymakers next meet in September; though this time the focus would be on buying mortgage-backed securities rather than Treasuries, the firm said.

"The July jobs report should do little to change expectations for a further move in September from the Fed," said Andrew Wilkinson, chief economic strategist at Miller Tabak.

A Goldman Sachs report Monday said that easing seems likely at the next Federal Open Market Committee meeting in September unless economic data improves materially by then.

The most likely option at the meeting is the extension of the forward rate guidance to mid-2015, the firm's economists think. "Balance sheet expansion at the September meeting can't be ruled out, but still appears more likely in late 2012 or early 2013."

Goldman Sachs added that while the Fed may take action soon, Congress is unlikely to do so; they expect little further developments on the fiscal cliff until after the November election.

Over the weekend, European Central Bank executive board member Benoit Coeure told Slovakian newspaper Hospodarske Noviny that the ECB wouldn't let sovereign bond yields increase as a result of investors bets against the currency and should find ways to channel loans into the real economy.

"Whether our funding operations should be better targeted to the financing of the real economy, and particularly of SMEs, even though the implementation would obviously be difficult, would deserve further thoughts," he said.

He also told the paper that "any means to channel ECB liquidity where it is most needed, namely to households and enterprises, is worth considering."

Paul Donovan, global economist at UBS, said that Coeure gave a "pretty explicit indication that the ECB would cap yields to prevent Euro breakup."

In other European news, international inspectors have finished their review of Greece's progress in fulfilling the requirements of its second bailout, with plans to return in September to decide on whether to provide Greece with more aid.

Greek officials and inspectors have reportedly made considerable progress on talks towards measures that would save the country more money and lead to more spending cuts.

The FTSE in London finished up 0.37% and the DAX in Germany settled up 0.77%. This, as Spanish and Italian bond yields eased.

Hong Kong's Hang Seng index finished ahead by 1.69% and the Nikkei in Japan settled up 2%.

September crude oil futures settled up 80 cents at $92.20 a barrel. December gold futures finished up $6.90 to settle at $1,616.20 an ounce.

The benchmark 10-year Treasury was flat with the yield sitting at 1.567%. The greenback was down 0.08%, according to the dollar index.

On the corporate news front, Knight Capital Group ( KCG) announced it has secured $400 million in financing as the firm continues to try to combat the damage done by last week's trading debacle caused by a software glitch.

In a Securities and Exchange Commission filing, Knight said an unnamed group of investors had "agreed to purchase an aggregate of $400 million of 2% convertible preferred stock," which "will be convertible into approximately 267 million shares of common stock of the Company."

Knight shares closed down 24% at $3.07.

Best Buy ( BBY) founder Richard Schulze has offered to buy the company for $24 to $26 a share. Shares surged 13% to close at $19.99, providing evidence of some investor skepticism about the deal.

Tyson Foods ( TSN), the meat and chicken processor, posted worse-than-expected third-quarter results amid tepid protein demand domestically and sharply higher grain costs. Shares fell 8%.

Shares of Regions Financial ( RF) rose 1% after the bank's stock was upgraded to buy from neutral at Bank of America. The firm, which also lifted its price target to $8 from $7, said it sees "material upside potential" left at current levels.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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