Stocks closed higher
despite 3M warning

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By Lisa Singhania
Associated Press

NEW YORK >> Wall Street began its fiscal third quarter on a mostly positive note today as blue chips shrugged off an earnings warning from 3M to rally on some better-than-expected economic news.

Technology stocks were more mixed, as investors cashed in those holdings to take advantage of last week's strong performance. Analysts said the selling reflected investors' worries about the future.

"This is a beginning-of-the-quarter kind of push-up," said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray. "But there's still a huge cloud ahead, especially regarding second-quarter earnings that are going to start coming out over the next few weeks."

The Dow Jones industrials closed up 91.25 at 10,593.65.

Broader indicators were mixed. The Nasdaq composite index fell 11.82 to 2,148.72, ending a five-session winning streak, while the Standard & Poor's 500 index gained 12.35 to 1,236.73.

Advancing issues narrowly led decliners on the New York Stock Exchange, with 1,620 rising, 1,471 falling and 190 unchanged. Volume came to 1.27 billion shares.

The Russell 2000 index fell 14.25 to 498.39. The NYSE composite index rose 5.52 to 627.28 and the American Stock Exchange composite index fell 14.74 to 903.06.

The Treasury's 10-year bond rose 19/32 to 97 17/32, while its yield fell 8 basis points to 5.328. The 30-year note rose 30/32 to 95 16/32; its yield fell 7 basis points to 5.689.

Buying was strong across the market. Drug maker Johnson & Johnson gained $1.23 to $51.19, while chip maker Intel rose 81 cents to $30.06.

Even 3M, which reported second-quarter earnings would fall below expectations because of the sluggish economy, gained $3.16 to $117.26, rebounding after an earlier loss.

Still, investors weren't spending wildly. Analysts said Wall Street is still concerned about earnings ahead, particularly after last month's incessant string of corporate warnings.

"This is a market that has a penchant for selling into short-term rallies, like what we're seeing with technology right now," said Belski. "That just tells you that longer-term people are still indecisive and not convinced that everything is OK.

Tech, which is viewed as a riskier bet in the short-term, suffered from those doubts. Among the sector's more notable decliners: PMC-Sierra, off 89 cents at $30.18, and Microsoft, down $2.40 at $70.60.

The apparent demise of two high-profile mergers also captured Wall Street's attention.

Honeywell dropped 79 cents to $34.11, ahead of European regulators' vote tomorrow on a proposed merger with GE, a deal that is widely expected to be rejected. GE rose $1.20 to $50.20. UAL's United Airlines and US Airways also confirmed they are in discussions regarding the possibility of ending their planned merger.

Investors appeared pleased by data that suggested the nation's economic picture, while still sluggish, isn't worsening.

The Commerce Department reported today that consumer spending rose by 0.5 percent in May, slightly faster than many analysts were forecasting. And data from the National Association of Purchasing Management showed improvement in its June index; activity in the manufacturing sector is continuing to decline, though not as quickly.

"The sense is that the economy is not getting worse and that there's the chance that it could be beginning to get better," said Bill Barker, investment strategy consultant at Dain Rauscher.

Wall Street additionally coped with revisions to the closing prices of 65 stocks on the Nasdaq Stock Market after some technical problems Friday. Those troubles shut down two of the Nasdaq's key trading systems for most of the afternoon, despite efforts to restart them and an extension of the regular trading session.

Forty-six of the changes were attributable to the market's technical problems, while 19 were due to a volume surge caused by the annual rebalancing of the Russell 2000, which also occurred Friday.

Overseas, Japan's Nikkei stock average fell nearly 1.7 percent. European issues fared better. Germany's DAX index rose 0.8 percent, Britain's FT-SE 100 gained 1.3 percent, and France's CAC-40 climbed 1.4 percent.