By Peter McKay, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks ended with a slight gain Tuesday after being whipsawed by bets in the financial sector and a rally in telecommunications, which benefited from Cisco Systems Inc.'s unveiling of a new router.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,467, -30.72, -0.29%) moved between gains and losses late in the day before ending 11.86 points higher, or 0.1%, at 10,564.38. The Nasdaq Composite Index /quotes/comstock/10y!i:comp (COMP 2,252, -12.87, -0.57%) was the strongest of the major indexes, with a gain of 0.4%.
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The S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,102, -4.60, -0.42%) rose 0.2%, led by a 1.2% gain in its telecommunications sector, which benefited from hopes that Cisco's new device will help alleviate congestion on mobile data networks.
Sprint Nextel Corp. /quotes/comstock/13*!s/quotes/nls/s (S 4.76, -0.08, -1.65%) shares jumped 6.5%, while Verizon Communications /quotes/comstock/13*!vz/quotes/nls/vz (VZ 28.88, -0.03, -0.10%) shares rose rose 0.9%. Read Telecom Stocks
The S&P 500's financial sector finished with a small gain overall, up just 0.3%. See Financial Stocks.
But there was extremely heavy volume in just four of its names: American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 38.97, -0.06, -0.15%) leapt 12.6%, Fannie Mae jumped 5.9%, Freddie Mac leapt 7.6%, and Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 4.12, +0.03, +0.73%) was up 7.3%. Read more on Citi, AIG stocks.
Citi was helped by a a report on Fox Business that the government is discussing plans to sell its 27% stake in the bank, perhaps within the next three months. That in turn spurred buying in some of the other names that are still subject to the heaviest government involvement in the wake of the recent financial crisis, though no moves had been announced by the Treasury or other agencies as of Tuesday's market close.
AIG surged as a debt sale by an important unit went well, the Wall Street Journal reported Tuesday. A $1.3 billion loan offering by International Lease Finance Corp. has met with strong investor demand, which will enable the aircraft-leasing unit of AIG to raise fresh funds to repay some of its maturing debt, the newspaper said.
In general, traders and analysts said Tuesday's session saw an increase in speculative betting, which added volatility and underscored the lack of confidence that has developed on trading floors since the market hit its bear-market lows exactly one year ago.
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"The main thing the market has going for it at this point is cheap money," thanks to low borrowing costs from central banks around the world, said Darren Chervitz, research director at Jacob Asset Management. "We're positioning ourselves for the day when fundamentals will matter again, but we haven't reached that point yet."
The Dow is now up 61% from its 12-year low hit on March 9, 2009, marking the depths of the financial crisis. The S&P 500 is up 69% over that timeframe, while the Nasdaq Composite is up 85%. Read about best and worst stocks since bear-market bottom.
The technology and telcom names that dominate the Nasdaq have often benefited over the past year from optimism that an early wave of capital investment will fuel a broader U.S. economic recovery, even as consumer spending and employment lag.
This week, Cisco's announcement regarding its new router, dubbed the CRS-3, has meshed nicely with that broader investment theme. The device would function as part of the backbone of networks that carriers assemble to deliver information to large swaths of customers, not an at-home device for individuals to set up for personal use.
Cisco, which hit a 52-week high on Monday in anticipation of the router announcement, ended flat on Tuesday. Read more about Cisco's new router plans.
Rex on Techs: Cisco's Router Hype
Networking giant borrows a page from Apple's marketing manual to promote a fast new router, and the market yawns. Rex Crum reports.
But some of its potential customers showed big gains, including a 1.1% gain in AT&T, which said it has tested the new Cisco device and found it to move data at 10,000 times the speed of a typial residential broadband connection.
"Even during the recession, people were demanding more and more data, which was incredible to see," said portfolio manager Kim Caughey, of Fort Pitt Capital Group. "It's become one of these trends that's not going away."
Elsewhere, the industrial sector benefited from a 0.8% rise in Boeing Co. /quotes/comstock/13*!ba/quotes/nls/ba (BA 67.22, -0.10, -0.15%) after Northrop Grumman Corp. /quotes/comstock/13*!noc/quotes/nls/noc (NOC 58.44, +0.05, +0.09%) said it would drop out of a protracted quest to win a $40 billion contract to build the U.S. Air Force's next generation of aerial-refueling planes, leaving Boeing as the only competitor left standing. Northrop shares slipped 0.3%. Read more on Boeing, Northrop.
General Growth Properties /quotes/comstock/11i!ggwpq/quotes/nls/ggp (GGP 13.88, +0.02, +0.14%) shares climbed 3.8% after the shopping-center operator got a proposal to help it emerge from bankruptcy from two of its biggest creditors.
UAL Corp. /quotes/comstock/15*!uaua/quotes/nls/uaua (UAUA 23.78, 0.00, 0.00%) shares climbed 3.7% after its United Airlines said February unit revenue -- the amount taken in for each passenger flown a mile on its planes and those of its affiliates -- jumped 17% to 19% over the same month a year earlier. Read Airline Stocks.
In other markets, the dollar weakened against the yen but gained ground versus the euro. Crude-oil futures slipped 38 cents to $81.49 a barrel, while gold futures also moved lower. Treasurys edged higher.
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