Microsoft Boosts Tech Stocks

By Jonathan Cheng And Nesil Staney

Stocks extended their winning streak to a fifth day after eking out a slight gain to open second-quarter earnings season.

The Dow Jones Industrial Average edged up 18.24 points, or 0.18%, to 10216.27, led by strong gains among technology companies. The market's modest advance adds to a blockbuster rally last week that recovered much of the Dow's losses this summer. The Dow is on its longest winning streak since April.

Investors are hoping strong earnings will focus attention on relatively healthy corporate fundamentals, though broader global economic concerns will continue to weigh.

Alcoa kicked off earnings by beating market expectations after the close. The stock rose 9% last week ahead of the report, fell slightly in regular trading Monday but then rose more than 3% in after-hours trading.

Technology stocks, including Microsoft, SanDisk and Qualcomm, were boosted by a wave of analyst upgrades. The Nasdaq Composite closed up 0.09% to 2198.36.

Greece said its budget deficit shrank, but the euro weakened. Treasury prices rose, pushing down the yield on the 10-year note to 3.048%. Crude-oil prices fell, while gold futures declined.

"The market really has priced in a lot of caution going into the earnings season, so anything pretty close to expectations or that only shows a marginal notching-down of the third-quarter outlook is probably going to be greeted pretty positively," said Nick Kalivas, vice president at MF Global.

Also weighing on the Dow were United Technologies, Caterpillar and Boeing. Weakness among the industrial components came as data showed Chinese imports slipped to a yearly growth rate of 34.1% in June, from 48.3% in May, although China's June exports grew 43.9% from the year-earlier month, beating estimates.

Offsetting the declines, Microsoft jumped 2% after Janney Capital Markets raised its investment rating on the stock to buy from neutral, saying "it remains a significant cash flow generator trading at compelling levels."

The Nasdaq Composite edged up 0.1% to 2198. The Standard & Poor's 500-share index slipped less than one point to 1078, with its materials and industrials sectors leading to the downside while the technology sector climbed.

Technology stocks were boosted by the upgrade for Microsoft, as well as upgrades for SanDisk, Yahoo and Qualcomm. Yahoo was raised to buy from hold by Needham, while SanDisk was upgraded to buy from neutral by UBS and Qualcomm was boosted to conviction buy from buy by Goldman Sachs.

Among stocks in focus, American depositary shares of BP jumped 7.9% amid speculation that the whole firm or some of its assets may be sold off. The Wall Street Journal reported that BP was in talks to sell assets to Houston-based Apache in a deal that could be worth as much as $10 billion.

Aon slid 7.1% after the insurance broker agreed to buy human-resource consulting and outsourcing company Hewitt Associates for $4.9 billion in cash and stock. Shares of Hewitt Associates soared 32%. The transaction, expected to close by November, valued Hewitt at $50 a share when announced--a 41% premium over Friday's closing price. Hewitt's valuation cheered the market, Kalivas said.

"That's a pretty big premium and that does suggest the market has a little bit of value to it," Kalivas said.

Playboy Enterprises surged 41% after founder Hugh Hefner and private-equity company Rizvi Traverse Management made an offer to buy the rest of Playboy, valuing the media and branding company at about $185 million.


Write to Jonathan Cheng at jonathan.cheng@wsj.com and Nesil Staney at nesil.staney@dowjones.com

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