Stocks Finish Mixed

Blue chips logged gains Monday as the market tried to shake off its dismal start to 2008

Stocks closed mixed Monday as short covering and bargain hunting helped blue chips and other selected issues rebound after the market's dismal start to 2008 last week due to worries about the economy. Along with blue chips, the makers of consumer staples and drugs, and other types of companies that tend to weather economic slowdowns generated some buying interest, according to Standard & Poor's MarketScope. In the absence of economic data, traders were paying attention to speeches by Treasury Secretary Henry Paulson and Atlanta Federal Reserve Bank president Dennis Lockhart.

On Monday, the Dow Jones industrial average finished 27.31 points, or 0.21%, higher at 12,827.49. The broader S&P 500 index gained 4.55 points, or 0.32%, to 1,416.18. The tech-heavy Nasdaq composite index shed 5.19 points, or 0.21%, to 2,499.46.

Trading volume was moderate on Monday. Market breadth was mixed. On the New York Stock Exchange, 18 shares advanced in price for every 14 that declined, while NASDAQ breadth was 16-14 negative.

U.S. equities took a beating on Friday on the back a dismal report that showed U.S. nonfarm payrolls up by only 18,000 in December, after gains of 115,000 in November and 170,000 in October. The much-anticipated report was seen as a key test of the economy's strength going into the New Year. The unemployment rate climbed from 4.7% to 5%, the highest in two years.

Paulson's speech on the economy Monday discounted a rush to implement economic stimulus and emphasized patience and deliberation over a quick fix. Speculation has been rising, particularly after Friday's poor payrolls report, that the Bush Administration could

seek additional tax cuts or other stimulus measures to ensure the economy does not dip into recession, notes Action Economics.

Atlanta Fed President Lockhart told the Atlanta Rotary Club that "the negatives in our economy may be gaining momentum." Cuts in the Fed funds rate so far, and globally coordinated liquidity injections, "were not sufficient to remedy Wall Street's distressed

conditions." Lockhart said his outlook for this year's economic performance hinges on “how financial markets deal with their problems."

While he is "troubled by the elevated level of inflation," Lockhart expects energy costs will moderate and "inflation pressures will abate." Nevertheless, "At this juncture, the times present even greater uncertainty than usual" he added, noting that "these circumstances call for policymakers to be prepared to respond pragmatically."

Fed Chairman Ben Bernanke could outline plans to fight potential stagflation when he speaks on Thursday, according to S&P MarketScope. Investors are hoping the Fed recognizes the need for further easing of interest rates and takes action on it later this month.

Technology stocks were hit by a raft of downgrades Monday, with UBS lowering its ratings on International Business Machines (IBM) and Network Appliance (NTAP) to neutral from buy, and Bear Stearns downgrading Best Buy (BBY) to underperform from outperform. In addition, Motorola (MOT) announced a round of 1,600 layoffs.

In what's a relatively quiet week for economic data, Tuesday's pending home sales report for November will be watched for further signs of potential stabilization in the housing market, economists are expecting an increase in wholesale sales for November, due out on Thursday. The U.S. trade deficit, to be released on Friday, is expected to widen in November due to soaring oil prices.

February NYMEX crude oil fell $2.82 to $95.09 per barrel Monday on reports that temperatures in the Northeast U.S. may be as much as 30 degrees Fahrenheit above normal through Jan. 9, according to Accuweather. That's expected to hurt demand for heating oil. The warm weather adds to demand concerns stoked by last week's U.S. government jobs report for December, which showed unemployment up at a two-year high. A confrontation between Iranian and U.S. ships in Gulf of Hormuz over the weekend did not appear to have an impact on prices.

COMEX February gold futures fell $3.70 to $862.00 per ounce Monday.

Among the stocks in the news Monday, Celgene (CELG) shares rose after it said its preliminary unaudited results for 2007 show total revenue will increase by more than 50% from the prior year to about $1.4 billion, while adjusted earnings are expected to double to about $1.05 per share. The drug maker is targeting 2008 revenue to grow by more than 30% to about $1.8 billion and profits to increase by about 45% to between $1.50 and $1.55 per share.

ShoreTel Inc. (SHOR) shares plunged after the provider of switch-based Internet protocol (IP) telecommunications systems cut its second-quarter revenue forecast to $29.7 million to $30.7 million from a prior estimate of $32 million to $35 million, citing declining sales to new customers.

Delta Petroleum (DPTR) shares fell after it said it granted a total of 22,542 shares to five new employees on Dec. 31, 2007 under its 2006 New Hire Plan as an inducement to entering into employment with the company.

European stocks finished mixed on Monday. In London, the FTSE 100 index was off 0.20% at 6,335.70. In Paris, the CAC 40 index was up 0.11% at 5,452.83. Germany's DAX index rose 0.11% to trade at 7,817.17.

Major Asian markets finished mostly lower. Japan's Nikkei 225 index fell 1.30% to 14,500.55. In Hong Kong, the Hang Seng index slid 1.24% to 27,179.49. The Shanghai composite index climbed 0.59% to 5,393.34.

Treasury market

Treasuries were higher in price Monday in bit of a flight to safety from volatile stocks and the expectation the Fed will have to cut rates. The 10-year note rose 09/32 to 103-12/32 for a yield of 4.83%, while the 30-year bond rallied 19/32 to 110-30/32 for a yield of 4.34%.