US STOCKS-Wall St bounces but investors dump Facebook - Reuters US STOCKS-Wall St bounces but investors dump Facebook - Reuters

Tuesday, May 22, 2012

US STOCKS-Wall St bounces but investors dump Facebook - Reuters

US STOCKS-Wall St bounces but investors dump Facebook - Reuters

Mon May 21, 2012 1:51pm EDT

* Facebook stock falls nearly 14 pct to session low at $33

* World leaders back Greece, vow to combat crisis

* Apple stock boosts Nasdaq

* Dow up 0.8 pct, S&P up 1.3 pct, Nasdaq up 2.1 pct

By Edward Krudy

NEW YORK, May 21 (Reuters) - U.S. stocks rebounded on Monday after their worst weekly decline of the year with signs that investors were quickly unloading Facebook shares following its broken IPO and redeploying capital elsewhere in the technology sector.

Facebook Inc's shares fell sharply below their $38 issue price as underwriters' support of the initial public offering faded after its Friday debut. The stock dropped more than $5, or 13.7 percent, to hit a session low of $33.00 in early trading. By early afternoon, the stock had regained a little of that loss, but was still down 9 percent at $34.80.

That contrasted with a sizeable rally in the rest of the Nasdaq, especially in shares of Apple, which rose 4.3 percent to $553.40. Apple's stock is off 13 percent from its most recent closing high in April, with about half of that loss coming in the week ahead of Facebook's IPO.

"You may have people that raised money to participate in Facebook by dumping other tech stocks that are now reversing it to free up the cash," said Jana Sampson, co-chief investment officer of OakBrook Investments in Lisle, Illinois

On Saturday, G8 leaders stressed that their "imperative is to promote growth and jobs" and gave verbal backing for Greece to stay in the euro. That helped improve sentiment after failed elections in Greece lifted speculation that the country was headed toward exiting the euro zone.

"We sold off on some fear, and not all of that fear was realized," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

"We're in a bit of an oversold bounce in here at the moment and whether we're going to build on all of this, we'll find out this week. We're still hostage to European news and will be for the foreseeable future."

The Dow Jones industrial average gained 104.25 points, or 0.84 percent, to 12,473.63. The Standard & Poor's 500 Index rose 16.99 points, or 1.31 percent, to 1,312.21. The Nasdaq Composite Index added 57.86 points, or 2.08 percent, to 2,836.65.

Another factor helping sentiment: China's premier called for additional efforts to support growth on Sunday, signaling Beijing's willingness to take action after a recent series of economic indicators suggested that the world's second-biggest economy will slow further in the second quarter.

Investors are watching the 1,300 to 1,290 range on the S&P 500 as a major support level, the lower end of which was tested last week after the benchmark index had fallen 7.8 percent since the end of April. The bottom of the range coincides with the S&P 500's 10-month moving average.

"The ability to find support near 1,290-1,300 can trigger buyers to return, igniting the next sustainable rally towards our 2012 target in the mid-1,400s and possibly overshoot to low-1,500s," UBS technical analysts said in a note to clients.

Facebook shares were expected to face tough trading this week if lead underwriter Morgan Stanley stops supporting the stock and managers listed lower down in the IPO book, who were hoping for an early surge, decide to get out before going underwater.

"It was just a poorly done deal, and it just so happens to be the biggest deal ever for Nasdaq, and they pooched it. That's the bottom line here," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The Nasdaq said it plans to implement procedures through which the Financial Industry Regulatory Authority (FINRA) will accommodate orders not executed in Facebook during the social media company's market debut on Friday. Nasdaq shares gained 2.2 percent to $22.47 after falling more than 4 percent on Friday.

In earnings news, Lowe's Cos Inc, the world's second-largest home improvement chain, cut its fiscal-year earnings outlook and said demand slowed toward the end of the traditionally strong first quarter. The stock fell 9.6 percent to $25.75.

Yahoo shares rose 1.1 percent to $15.59 after news that Chinese Internet entrepreneur Jack Ma is buying back up to half of a 40 percent stake in his Alibaba Group from Yahoo for $7.1 billion in a deal that moves the Chinese e-commerce leader closer to a public listing.

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