NEW YORK (CBS.MW) -- Stocks reversed early losses to end on an upswing Monday, fueled by interest in the financial, energy and networking sectors. Helping to alleviate worries about the economy were data showcasing a seemingly bulletproof housing market.




July existing home sales shot up 4.5 percent to an annual rate of 5.33 million, in line with economists' expectations. And new home sales surged 6.7 percent to a record annual rate of 1.017 million in July, much more than the 975,000 level that has been predicted by economists. See full story.




Tuesday will see two key economic reports on tap: July durable goods orders, seen rising 1.4 percent, and August consumer confidence, expected to have risen to 97.2. Check market stats and latest sector performance.




While the data calendar is relatively busy this week, it'll be extremely light on earnings news. Only one of the Dow's 30 components has yet to unfurl its quarterly results: Hewlett-Packard (HPQ: news, chart, profile), scheduled to post its fiscal third-quarter earnings after the close on Tuesday.




The Dow Jones Industrial Average ($INDU: news, chart, profile) sprinted 46 points, or 0.5 percent, to 8,919. AT&T, General Motors, J.P. Morgan, Exxon Mobil and American Express spearheaded the blue-chip gauge's ascent while Walt Disney, United Technologies, McDonald's, IBM and Boeing continued to lead on the downside.




Though gains in the major averages were modest, the bounce off of the lows was swift and most sectors participated in the upside action.




The Nasdaq Composite ($COMPQ: news, chart, profile) put on 11 points, or 0.8 percent, to 1,391 and the Nasdaq 100 Index ($NDX: news, chart, profile) gained 6 points, or 0.6 percent, to 1,016.




The Standard & Poor's 500 Index ($SPX: news, chart, profile) added 0.8 percent while the Russell 2000 Index ($RUT: news, chart, profile) of small-capitalization stocks climbed 1.9 percent.




While encouraged by the market's resilience so far, analysts concur that it'll take time for stocks to recover from July's brutal selling.




Kevin Marder, chief market strategist at Ladenburg Thalmann Asset Management, points out that bottoms following major bear markets are a process, not an event.




"Processes take time. Thus, perhaps the healthiest course of action would be a multi-month period of base building in which the averages move sideways, all the while putting in a durable floor to their long decline. This backing-and-filling scenario would go a long way toward rebuilding confidence among investors as well as companies eyeing the new issue market," Marder said.




"This is not likely to be a market that heads straight up for months on end but instead should make progress in more of a traditional fashion, through a series of rallies and pullbacks, which allow for some good base-building and the creation of some solid support levels at successively higher levels," echoed Bob Dickey, technical strategist at RBC Dain Rauscher.




Dickey thinks the market is overbought on a short-term basis but feels a dip this week could provide a good entry point for traders and long-term holders alike.




Volume was very light at 995 million on the NYSE and at 1.43 billion on the Nasdaq Stock Market. Market breadth was narrowly positive, with advancers outpacing decliners by 23 to 9 on the NYSE and by 21 to 12 on the Nasdaq.




Fund flow tracker Trim Tabs turned "cautiously bullish" from "moderately bullish" in the latest week due to a significant slump in corporate buying activity.




"We had been hoping that the July pickup in stock buyback activity was due to more than just an overly depressed stock market. If there isn't a pickup in buying -- particularly since the new offering calendar will resume during the second week of September - we will turn cautiously bearish next week," Trim Tabs told clients.




Morgan's Biggs says: "Stay invested"




Barton Biggs, global strategist at Morgan Stanley, feels the recent equity rally will last longer given that the July lows were marked by a "parabolic decline and massive capitulation that has not been seen for 40 years."




He notes that auto sales have been strong, refinancings and home equity loans are surging, corporate profits have turned up and that money growth has accelerated.




"I don't believe in the double dip," Biggs told clients. "Stay invested."




One portfolio manager expects leadership to be very narrow over the coming months.




"Overall, we are now in an extremely narrow market environment and we expect that only 20 percent of the entire stock market will prosper in the upcoming months. We expect the other 80 percent [to] go [nowhere] until business spending resurges and re-stimulates the economy," commented Louis Navellier of the Navellier Performance Funds.




"We envision a stock market environment with just a select group of stocks performing well while the overall stock market meanders sideways," the fund manager concluded.




Hershey rises on takeover speculation









Hershey shares (HSY: news, chart, profile) rose 2.3 percent on a USA Today report maintaining that Switzerland's Nestle made an $82-a-share bid for the candymaker. See full story.




In the defense sector, TRW (TRW: news, chart, profile) announced late Friday that it won a government weather satellite contract worth almost $3 billion. The deal is expected to be worth more than $1 billion for Raytheon (RTN: news, chart, profile). TRW climbed 1.7 percent while Raytheon lost 3.3 percent. See the full story.




In the biotech group, Alkermes (ALKS: news, chart, profile) announced a 23 percent workforce reduction due to expectations of a delay in the U.S. launch of Risperdal Consta. The pharmaceutical company projects savings of $20 million to $25 million in fiscal 2003. Shares slid 6.8 percent.




Fitch downgraded the senior unsecured debt rating of Walt Disney (DIS: news, chart, profile) to reflect "persistent weakness in key measures of cash-flow leverage resulting from higher debt from the $5.2 billion Fox Family acquisition in October 2001." Shares slid 1.3 percent in recent dealings. See full story.




Oracle slides while Ciena rallies




Sanford Bernstein lowered its fiscal first quarter earnings estimate on software firm Oracle (ORCL: news, chart, profile) on expectations that revenue will be lower, primarily in the applications and application servers businesses. Shares fell 2 percent.









Ciena (CIEN: news, chart, profile) rallied 6 percent after Soundview Technology Group upped its rating on the fiber-optic company to an "outperform" from a "neutral" on belief the July quarter represents a low point in analyst estimates and that the company is about to return to profitability. But S&P cut its credit rating on Ciena to reflect the company's dramatic decline in sales and expectations that business conditions will remain weak over the intermediate term. Checking the pulse of other stocks in the group, Lucent climbed 3.3 percent while Nortel Networks slipped 0.8 percent.




Meanwhile, Merrill Lynch told clients its most recent checks revealed that overall wireless bookings for the third quarter appeared to be up sequentially, with stronger-than-expected order rates from Nokia (NOK: news, chart, profile) and steady order rates from Motorola (MOT: news, chart, profile).




"We believe strength in orders from Nokia is a result of new cell phone introductions and the company's aggressive attempt to regain lost market share. We believe this has benefited Nokia suppliers such as RF Micro Devices (RFMD: news, chart, profile), Texas Instruments (TXN: news, chart, profile), TriQuint Semi (TQNT: news, chart, profile) and Cypress Semi (CY: news, chart, profile).




But Merrill also sounded a note of caution. "Although business conditions appear to be stabilizing with pockets of strength, we remain cautious on the wireless component market due to unrealistically high expectations of handset sales during 2002."




Nokia erased 1.8 percent, RF Micro rose 3.3 percent and TriQuint descended 1.1 percent.




Salomon Smith Barney downgraded communications chip company Applied Micro Circuits (AMCC: news, chart, profile) to an "outperform" from a "buy" due to several factors, including ongoing competitive risk and lack of a catalyst beyond an attractive valuation. Shares tumbled 4.7 percent while PMC-Sierra lost 1.2 percent and Vitesse Semi slumped 2.9 percent.




Finally, Bear Stearns took down its rating on Fairchild Semi (FCS: news, chart, profile) to an "attractive" from a "buy" as channel checks in Asia indicate that high inventory levels and slowing orders have forced suppliers to slash prices. Fairchild slumped 1.3 percent.




Check Movers & Shakers for the latest individual stock action.




Treasurys mixed




Government bonds lost the bulk of earlier gains as stocks found their footing late in the trading day.




The 10-year Treasury note was up 9/32 to yield ($TNX: news, chart, profile) 4.205 percent while the 30-year government bond edged up 6/32 to yield ($TYX: news, chart, profile) 5.01 percent. See Bond Report.




Peter McTeague of Greenwich Capital Markets believes that the fundamental landscape for the fixed-income market remains "quite friendly and will likely improve over the next few months."




There's nothing like uneven growth and falling inflation, the strategist said, to help bonds.




Investment-grade issuance picked up considerably last week -- it was the most active week for new offerings since mid-March -- assuaging fears that a credit crunch was at hand.




IDEAglobal notes that the issuance spike corresponded with a spread tightening move that erased widening in early August leading up to the Aug. 14 certification deadline.




IDEA expects the "pace of opportunism" to continue into September, leading to incremental gains in the 4-week issuance averages. Still, the research firm notes that there were no "junk" bond offerings in the latest week, keeping the risk of a high-yield liquidity squeeze in play.




In the currency sector, the dollar edged up 0.1 percent to 119.57 yen while the euro declined 0.1 percent to 97.22 cents.




Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York.