The Dow industrials and the S&P 500 rose on Monday, led by health-care and consumer staple shares, as investors snapped up stock in companies seen able to withstand any economic slowdown following dismal employment data last Friday.
Drug maker Merck & Co and cigarette maker Altria Group Inc were among defensive plays by investors that helped the S&P and the Dow eke out gains at the end of a choppy session and gave the S&P its first positive finish of 2008.
But the Nasdaq finished lower, as technology shares with global exposure fell on concerns a US slowdown could damage the global economy. Apple Inc fell 1.3 per cent, while Hewlett-Packard Co slid 3.2 per cent.
"The market is trying to find its footing after a poor start to the year," said Kurt Brunner, portfolio manager with the Swarthmore Group in Philadelphia. "The staples names are hanging on in there, but you've had a lot of talk about the global slowdown and how that is going to impact the industrial names and technology. Hewlett's really taking it on the chin today."
Retailers will be in the spotlight on Tuesday. After Monday's closing bell shares of Circuit City fell 5 per cent to $4 when the electronics retailer reported an 8.9 per cent drop in December sales.
Shares of Starbucks Corp, meanwhile, rose 4.5 per cent to $19.20 in extended trade after the coffee house chain said Chairman Howard Schultz will return in the additional role of chief executive and the company will focus on international growth.
The Dow Jones industrial average ended up 27.31 points, or 0.21 per cent, at 12,827.49. The Standard & Poor's 500 Index was up 4.55 points, or 0.32 per cent, at 1,416.18.
The Nasdaq Composite Index fell 5.19 points, or 0.21 per cent, to close at 2,499.46. This has been the worst start to a year for the Nasdaq since 2000, when it started the first four days of the year down 8.4 per cent. So far this year it is down 5.76 per cent.
All three major indexes kicked off the year sharply lower last week, albeit in thin volume. By Monday, most trading desks were fully staffed.
On Friday, a dismal jobs report added to recession concerns, which persisted as a major theme in Monday's trading. US President George W Bush said on Monday the US economy is well positioned to withstand shocks from the housing slump, financial market turmoil and high oil prices, though he said continued economic expansion is not a certainty.
Merck shares gained 1.9 per cent to $57.92 on the New York Stock Exchange, while shares of Altria, parent of cigarette maker Philip Morris USA, gained 3.1 per cent to $77.23. Biotechnology company Celgene Corp rose 1.7 per cent to $50.49 after targeting a 45 per cent rise in adjusted earnings for 2008.
Eli Lilly posted its biggest one-day advance in more than 2-1/2 years on news Morgan Stanley upped its recommendation on the drugmaker's stock. Its stock was up 5.3 per cent to $54.55.
AT&T rose 1.3 per cent to $41.43, and was the top boost to the S&P 500, after Deutsche Bank named it as its top large-cap telecom services pick for 2008, with a price target of $50.
Utilities also lent the market support, led by FPL Group Inc, which gained 4.7 per cent to $72.03. A sharp pullback in crude oil prices hurt shares of energy companies. Exxon Mobil fell 0.9 per cent to $91.22. US crude tumbled 2.7 per cent a barrel to $95.14 on the New York Mercantile Exchange as unseasonably warm weather and worries of a looming recession in the United States, the world's top oil consumer, outweighed tensions between Iran and the United States.
The latest geopolitical concerns also added to investors' unease on Monday. The Pentagon said five Iranian boats made aggressive maneuvers and showed hostile intent against three US Navy ships at the weekend in the Strait of Hormuz. Oil flows through the Strait account for roughly 40 per cent of globally traded oil, according to the US Energy Information Administration.
Trading was moderate on the NYSE, with about 1.71 billion shares changing hands, just below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.59 billion shares traded, ahead of last year's daily average of 2.02 billion.
Rising stocks outnumbered falling ones by a ratio of about 9 to 7 on the NYSE, while on the Nasdaq decliners beat advancers by a ratio of about 8 to 7.