Wall Street Holds on to Slim Gains

NEW YORK -- Wall Street held on to thin gains Monday as investors weighed fluctuating oil prices and profit warnings against a fresh round of acquisition activity that reflected companies' confidence in the economy.

Gap Inc. surged more than 10 percent on a report that the retailer is considering strategic alternatives for the business, which could include a sale. There were also several acquisitions announced during the session that indicates merger and acquisition activity is off to a strong start in 2007.

However, there was an element of caution in the market ahead of fourth-quarter corporate earnings, which start Tuesday when Alcoa Inc. posts results. Several profit warnings from a number of companies — including airline UAL Corp., electronics maker Molex Inc., and telecommunications firm Tellabs Inc. — cast a shadow over major indexes ahead of the profit reports.

Meanwhile, volatile oil prices also kept investors at bay. The market saw crude prices rebound with a surge of more than $1 a barrel, then dropped below the $56 mark, as traders placed bets about the pace of winter demand.

Peter Dunay, an investment strategist with New York-based Leeb Capital Management, said investors are trading conservatively ahead of earnings reports. He said the biggest thing on the horizon is "the impact any kind of profit warnings are going to have."

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"This is one of those Mondays were people are doing a bit less until we see an impetus," he said. "The market is at an inflection point. Energy is big, but it has been down so much over the past few weeks that the fact it's up should be scaring participants too much."

In late afternoon trading, the Dow Jones industrial average rose 13.54, or 0.11 percent, to 12,411.55.

Broader stock indicators advanced. The Standard & Poor's 500 index was up 1.62, or 0.11 percent, at 1,411.33, and the Nasdaq composite index added 4.86, or 0.20 percent, to 2,439.11.

Bond prices dipped in the absence of market-moving news, with the yield on the benchmark 10-year Treasury note rising to 4.66 percent from 4.65 percent late Friday.

A barrel of light sweet crude fell 22 cents to $56.09 on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices rose.

There was some economic news out during the session.

Federal Reserve Vice Chairman Donald Kohn said in a speech that recent inflation data are "encouragingly consistent" with the central bank's forecast for a gradual decline. However, he warned it's still too early for officials to relax their worries about price pressures.

"We're looking at some pretty strong fundamentals with the economy, interest rates, inflation and valuation," said Leo Grohowski, chief investment officer for U.S. Trust. "The market looks to have a fairly equity-friendly investing backdrop."

Gap rose $1.60, or 8.5 percent, to $20.49 after the business news channel CNBC reported the company plans to explore strategic alternatives, including its possible sale. A spokesman for the company, which operates its flagship Gap stores, Banana Republic, and Old Navy, did not return telephone calls.

General Electric Co. announced an agreement to acquire oil and gas fields equipment supplier Vetco Gray for about $1.9 billion. Shares of GE fell 11 cents to $37.52 after agreeing to acquire

Pharmacy benefit manager Caremark Rx Inc. fell 34 cents to $56.03 after it rejected a $26 billion takeover bid from rival Express Scripts Inc. late Sunday. Caremark said it prefers a $22.2 billion offer from drug store chain CVS Corp. Express Scripts was off 56 cents at $68.30, while CVS fell 1 cent to $31.16.

A profit warning from Molex sent shares down $1.41, or 4.6 percent, to $29.39. The electronics maker cut its second-quarter profit projection due to weaker sales and lower prices in its mobile phone business.

Tellabs, which makes equipment for telecoms, guided its fourth-quarter revenue lower due to uncertainty in North American concerning the effect of industry consolidation. Shares fell 49 cents, or 4.6 percent, to $10.23.

However, American Airlines-parent UAL picked up 9 cents to $46.66 despite saying it expected to post a loss during the fourth quarter because of snowstorms in the Midwest during December.

Wal-Mart Stores Inc. dipped 45 cents to $46.94 after the world's largest retailer was downgraded by Goldman Sachs. The investment bank said Wal-Mart's strategy isn't clear and its turnaround plan is taking longer than expected.

Apple Computer Inc. rose 84 cents to $85.90 after JPMorgan reiterated an overweight rating on the Mac and iPod maker, and boosted its fiscal-first quarter profit projections.

Seattle Genetics Inc. rose $1.08, or 21 percent, to $6.37 after it struck a deal with Genentech Inc. on the development and commercialization of a cancer drug. Genentech rose 2 cents to $83.70.

RadioShack Corp. rose $1.90, or 11.3 percent, to $18.71 after saying its fourth-quarter profit will come in above year-earlier levels.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.22 billion shares.

The Russell 2000 index of smaller companies was up 2.48, or 0.32 percent, at 778.35.

Overseas, Japan's stock market was closed for a holiday. At the close, Britain's FTSE 100 was down 0.42 percent, Germany's DAX index was up 0.22 percent, and France's CAC-40 was up 0.02 percent.

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