Stocks Rise Amid Mergers, Earnings, Oil Concerns

NEW YORK – Stocks rose modestly Monday as investors bet on good fourth-quarter earnings news as the reporting season officially kicked off, although a late-afternoon wave of computerized trades wiped out part of the sessions' gains.

The Dow Jones industrial average (search) was up 17.07 points, or 0.16 percent, to close at 10,621.03. The Standard & Poor's 500 Index (search) was up 4.06 points, or 0.34 percent, to finish at 1,190.25. The Nasdaq Composite Index (search) was up 8.43 points, or 0.40 percent, to end at 2,097.04.

The Nasdaq ended higher for the first time in 2005, breaking a six-session losing streak.

The subdued close follows a poor start to the New Year, which has seen an emerging trend develop — repeated late-day selling into early gains. Traders and strategists cite two reasons for this — program trading and portfolio rebalancing, to lock in gains from 2004. Program trading is the automated buying and selling of blocks of shares according to predetermined parameters, such as price and time of day.

"There were some S&P 500 sell programs that kicked off and I think that was primarily responsible," said Tom Schrader, managing director of U.S. equity trading at Legg Mason Wood Walker in Baltimore.

Stocks also failed to get a lift from a late-day fall in the price of oil — usually a boost as lower crude helps corporate earnings and consumer spending. U.S. crude for February delivery settled at $45.33 a barrel, down 10 cents, after a volatile day when the price jumped over $47 a barrel on the New York Mercantile Exchange (search).

"We're doing all right for now, but earnings will really determine where we're going to go," said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. "And the key with earnings will be guidance for 2005. How concerned is corporate America about inflation? That's the big question."

A Commerce Department (search) report showed that wholesale inventories rose by 1.1 percent in November. Economists expected inventories to rise just 0.7 percent, slightly less than the 1.1 percent climb in October. But the report didn't affect Wall Street; analysts saw the rising inventories as companies hedging against economic uncertainty, particularly rising wholesale prices and possible inflation.

Inflation likely will continue to be a critical concern on Wall Street through earnings season, as companies discuss their forecasts for 2005. If companies are concerned that interest rates will rise quickly in response to a falling dollar and mounting inflationary pressures, then Wall Street could push lower, putting a definitive end to the markets' postelection rally.

Part of the fallback came from shares of energy companies trimming their gains as oil slipped back. Dow component Exxon Mobil Corp. (XOM), trimmed earlier gains that took it to $50.50, closing just 19 cents higher at $49.98. Rival ChevronTexaco Corp. (CVX), an S&P 500 member, rose 23 cents to $51.38.

Alcoa Inc. (AA), the world's biggest aluminum producer, posted a lower net profit after the closing bell as it took a charge for divesting non-core businesses. Its shares nudged 3 cents lower to $30.44 on the Inet electronic exchange.

During the regular session. Alcoa's stock slipped 0.7 percent, or 22 cents, to close at $30.47 on the NYSE.

Tobacco shares got a boost during ordinary trading, after Morgan Stanley raised its price target on the stock of Altria Group Inc., the parent of cigarette maker Philip Morris. Altria (MO), a Dow component, shot up 1.3 percent, or 80 cents, to $62.20.

Hollywood Entertainment Corp. (HLYW ) agreed to an $850 million buyout by Movie Gallery Inc., whose offer topped that of Blockbuster Inc. (BBI) by 15 percent. Movie Gallery is poised to become the second-largest video chain in the United States, behind Blockbuster. Hollywood Entertainment gained 81 cents to $13.86 and Movie Gallery added 94 cents to $20.02, while Blockbuster was down 17 cents at $9.12.

According to media reports, Wells Fargo & Co. (WFC) is in talks to acquire Barclays PLC (BCS), a deal reportedly worth more than $100 million. Barclays, considered a prime takeover target, climbed 77 cents to $45.42, while Wells Fargo slipped 4 to $62.13.

Shares of Western Wireless Corp. (WWCA) rose 85 cents to $37.37after it agreed to a $4.4 billion cash-and-stock buyout by Alltel Corp(AT), which would create the fifth-largest cell phone carrier in the United States. Alltel tumbled $1.37 to $54.75.

Nokia Corp. (NOK) was upgraded to "outperform" from "neutral" by Credit Suisse First Boston, which said the cell phone maker should be able to regain market share this year and next. Nokia was up 24 cents at $15.49.

Caterpillar Inc. (CAT) lost 86 cents at $92.52 after employees represented by the United Auto Workers agreed to a six-year contract, ending a nine-month dispute with 9,000 workers at factories in four states.

Fox Entertainment Group Inc. (FOX) jumped nearly 10 percent, or $3.06, to $34.28 after Rupert Murdoch's News Corp. Ltd. said it would buy out the other shareholders of its Fox Entertainment affiliate through an exchange offer worth $6 billion. News Corp. (NWS), an S&P 500 component, fell 3 percent, or 52 cents, to $17.13.

News Corp. is the parent company of the Fox News Channel, which operates FOXNews.com.

Trading was active, with 1.49 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 2.1 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year. Advancers outnumbered decliners on the New York Stock Exchange by about 5 to 3 and by about 9 to 7 on Nasdaq.

The Russell 2000 index of smaller companies was up 4.53, or 0.74 percent, at 617.74.

Overseas, markets in Japan were closed for a national holiday. In Europe, Britain's FTSE 100 closed down 0.28 percent, France's CAC-40 was flat for the session, and Germany's DAX index fell 0.21 percent.

Reuters and the Associated Press contributed to this report.