Late rally brings market back

The Dow recovers all of a 130-point loss. Supreme Court Justice Ginsburg delays the sale of Chrysler to Fiat. Apple cuts prices on iPhones. Banks hope to get the OK to repay government funds. McDonald's falls; US sales miss estimates.

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By Charley Blaine and Elizabeth Strott

Stocks stormed back from their lows this afternoon despite pressure on technology and metals shares and worries about rising interest rates.

But it wasn't clear if that momentum will carry over to Tuesday after U.S. Supreme Court Ruth Bader Ginsburg delayed Chrysler's sale to Italian automaker Fiat (FIATY, news, msgs). Several Indiana pension funds as well as consumer groups had opposed the deal.

The Supreme Court will consider a request for a longer postponement that could derail the deal.

The order gives Ginsburg or the full court more time to consider whether to delay the transaction while opponents file appeals. A decision may come in a day or two.

The Obama administration had warned that an intervention might lead to the liquidation of Chrysler. Fiat could walk away from the sale if the transaction if it is not closed by June 15, although Fiat CEO Sergio Marchionne told Bloomberg News that the company will "never" abandon the deal.

Today's late-day rally was triggered in part by a comment from Nobel Prize-winning economist Paul Krugman that the U.S. economy may start to emerge from the recession in September, Bloomberg News reported. Krugman made the comment at a lecture at the London School of Economics.

"Things seem to be getting worse slowly," he said. "There's some reason to think that we're stabilizing."

At the same time, short-sellers who had sold borrowed shares expecting the market to move lower were forced to buy the shares back when the Standard & Poor's 500 Index ($INX) started to move higher. The S&P 500 finished down 1 point to 939.

The Dow Jones industrials ($INDU), which had been down as many as 130 points at 12:30 p.m., closed up 1 point at 8,764. That was 12 points below their 2008 closing level of 8,776.39. The Dow did move into the black briefly in the last hour of trading but faded at the close.

The Nasdaq Composite Index ($COMPX) was off 7 points to 1,842.

Volume was very light on the New York Stock Exchange -- barely 1 billion shares; 1.7 billion shares is about normal. Nasdaq volume was about 2 billion shares.

The major averages have moved up a third or more since bottoming in March. Like today, the Dow moved into positive territory briefly on several days last week. The blue-chip index finished Friday above its 200-day moving average -- a big sign of investor confidence. With the late rally, the index finished above its moving average for a second day.

The interest-rate focus today was on the 2-year note, whose yield jumped to 1.40% this afternoon. A week ago, the yield was 0.95%. Meanwhile, the yield on the 10-year note, down much of the day, finished at 3.89%, up from 3.86% on Friday.

The Treasury is supposed to auction $35 billion in 7-year notes on Tuesday, $15 billion in 10-year Treasurys on Wednesday and $11 billion in 30-year notes on Thursday.

Stock Charts (Year)

Apple

Freeport-McMoRan Copper & Gold

Apple (AAPL, news, msgs) was down 0.6% to $143.85. Investors appeared to be disappointed at news that the company was dropping prices on a number of products, including notebook computers and iPhones.

Apple also introduced a faster model of the iPhone.

The price cuts on current iPhones -- to as low as $99 -- were a response to new competition from Palm (PALM, news, msgs) and Research In Motion (RIMM, news, msgs). Palm fell 6.5% to $12.16; Research In Motion was off 0.9% to $81.95.

Cisco Systems (CSCO, news, msgs), in its first day of trading as a Dow component, closed unchanged at $19.87. The stock had been lower most of the day. Cisco replaced General Motors (GMGMQ, news, msgs), which is working its way through Chapter 11 bankruptcy.

Meanwhile, falling prices for gold, copper, silver and steel pushed metals stocks lower. Copper was down 1.4% to $2.253 a pound. Gold was off 1.1% to $952.50 an ounce in New York.

Shares of US Steel (X, news, msgs) were down 3.7% to $34.87 and Freeport McMoRan Copper & Gold (FCX, news, msgs) was off 1.2% to $56.48.

Crude oil, which had been lower in overnight trading and much of the morning, was up 23 cents to $68.67 a barrel this afternoon. Exxon Mobil (XOM, news, msgs) was up 0.3% to $73.17. Offshore driller Transocean (RIG, news, msgs) was down 1.2% to $81.43.

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Financial stocks were generally higher; American Express (AXP, news, msgs) was the best performer of the 30 Dow stocks, up 2.8% to $25.65, followed by JPMorgan Chase (JPM, news, msgs), up 2.4% to $35.39. Goldman Sachs (GS, news, msgs), however, was down 0.4% to $148.35.

The S&P 500 Financial Sector exchange-traded fund -- technically the Select Sector SPDR-Financial (XLF, news, msgs) ETF -- was up 0.7% to $12.41.

Insurance company Travelers (TRV, news, msgs), which replaced Citigroup (C, news, msgs) in the Dow today, rallied to a 1.1% gain at $43.92. Citigroup closed down 1.2% to $3.42.

The nation's big banks awaited word from the government as to whether they can start paying back their Troubled Asset Relief Program funds.

Dow components 3M (MMM, news, msgs) and DuPont (DD, news, msgs) and were down 0.4% to $60.69 and 2.9% to $26.21, respectively, as the dollar rose. Their declines subtracted about 14 points from the Dow.

Both generate more than half their business outside the United States. When the dollar rises, the value of foreign profits falls.

The Dow has risen 11 of the past 13 weeks, but worries about rising interest rates could pressure stocks going forward.