Wall St rebounds

US stocks rebounded on Monday after a global equity sell-off last week, as optimism about earnings resurfaced and concern about credit conditions eased.

Financial shares, which have borne the brunt of fallout from tightening credit markets, bounced back in part after ratings agency Standard & Poor's upgraded Morgan Stanley's debt.

Sentiment about the sector also improved after the bailout of a hedge fund steeped in subprime mortgage market losses and a home lending unit of GMAC reported narrowing losses. General Motors Corp. shares rose 4.9 per cent, boosting the Dow.

Overall, analysts now expect a stronger second quarter than just a week ago. Expectations for quarterly earnings growth by Standard & Poor's 500 companies were raised to 6.8 per cent compared with the year-ago period from 6.0 per cent, according to Reuters Estimates.

"Maybe people had some time to reflect over the weekend, took a deep breath and saw that second-quarter earnings have been good – we're comfortably beating the modest expectations," said Doug Peta, market strategist at J&W Seligman in New York.

The Dow Jones industrial average gained 92.84 points, or 0.70 per cent, to end at 13,358.31. The Standard & Poor's 500 Index rose 14.96 points, or 1.03 per cent, to 1,473.91. The Nasdaq Composite Index climbed 21.04 points, or 0.82 per cent, to 2,583.28.

Stocks had traded erratically throughout the day – flip-flopping between positive and negative territory – before the rally gathered steam in the afternoon.

Shares of industrial companies gained after Ingersoll-Rand Co. Ltd. said it planned to sell its Bobcat machinery business and two other units to South Korea's Doosan Infracore.

Ingersoll-Rand shares rose 7.5 per cent to $51.77, while the S&P industrials index gained 1.5 per cent.

But that deal aside, there was a lack of the typical flurry of takeover and buyout announcements seen on many Mondays this past year. Tightening lending standards are threatening to slow or halt the pace of corporate buyouts, which fueled a rally in stocks this spring.

Among financial companies lifting the Dow was credit card issuer American Express whose stock has been suffering since it posted rising write-downs of bad loans last week. Shares of American Express rose 2.7 per cent to $60.14. The S&P financials index advanced 1.2 per cent.

Hedge fund Citadel Investment Group, LLC took over Sowood Capital's credit portfolio following speculation last week that heavy losses might force the smaller hedge fund to shut down.

And Residential Capital LLC, or ResCap, posted a loss of $254 million, which was 72 per cent smaller than the first quarter's $910 million. ResCap is owned by GMAC, the finance company once controlled by GM.

Shares of GM rose 4.9 per cent to $32.61 on the New York Stock Exchange. On Tuesday, the automaker is expected to report a swing to profit for the second quarter.

In earnings news, Tyson Foods Inc., the world's largest meat producer, rose 2.7 per cent to $21.98 after it reported a higher-than-expected quarterly profit on Monday due to higher beef, chicken and pork prices.

Dow component Verizon Communications Inc. reported higher earnings that met Wall Street's estimates. Shares of Verizon, the No 2 US phone company, fell 1.2 per cent to $41.51 on the NYSE. On Nasdaq, Rural Cellular rose 34.4 per cent to $42.76 after Verizon Wireless said it would buy the company for $757 million in cash.

But worries about the housing slump lingered. Trading in American Home Mortgage Investment Corp. was halted on the NYSE after its shares plunged in electronic trading before the market opened.

The mortgage lender said its banks demanded more margin after it wrote down the value of its mortgage and security portfolios. American Home Mortgage had plunged 39 per cent before the opening bell to $6.39.

Trading was active on the NYSE, with about 2.03 billion shares changing hands, above last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.35 billion shares traded, above last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 7 to 4 on the NYSE and about 17 to 14 on Nasdaq.

- Reuters