Stocks end up, Apple jumps after bell

NEW YORK (Reuters) - U.S. stocks rose on Monday, rebounding from last week's steep sell-off as optimism that Apple (AAPL.O) would deliver strong earnings drove the Nasdaq to a gain of 1 percent.

Apple did not disappoint, reporting sales and profit that handily beat Wall Street's forecasts after the closing bell, sending Nasdaq futures higher.

During the regular session, bargain hunters were out in force, snapping up shares in the sectors hardest hit during last week's slump, such as home builders, banks and retailers. Stronger-than-expected earnings from drug maker Merck (MRK.N) lifted its shares more than 3 percent and helped spur a late recovery in the Dow.

Technology stocks, along with the health-care sector, are seen as posting the biggest year-over-year earnings growth in the third quarter, according to Reuters Estimates. Tech stocks emerged largely unscathed from a dramatic sell-off on Wall Street late last week, spurred by fear about a contracting economy.

On Nasdaq, "it's really a few big-cap names attracting all the momentum players," said Michael Metz, chief investment strategist at Oppenheimer & Co, in New York. "There are so few games to play, the ones that attract the hot money attract them en masse and really perform."

The Dow Jones industrial average .DJI rose 44.95 points, or 0.33 percent, to end at 13,566.97. The Standard & Poor's 500 Index .SPX gained 5.70 points, or 0.38 percent, to finish at 1,506.33. The Nasdaq Composite Index .IXIC climbed 28.77 points, or 1.06 percent, to close at 2,753.93.

Shares of Apple shot up 2.3 percent to $174.36 on Nasdaq during regular-session trading. In extended hours, shares of the iPod maker climbed nearly 6 percent to $184.68.

AT&T (T.N) shares rose more than 1 percent after the bell on Monday on Apple's results, which included big sales of the iPhone for which AT&T is the sole telecom carrier.

AT&T, a Dow component, gained 58 cents to $41.75 in extended trading after the market's close. The stock ended the regular session at $41.17, down 0.5 percent, on the New York Stock Exchange.

In contrast, shares of Texas Instruments slipped 3.6 percent to $33.07 in extended-hours trading after the chip maker gave a revenue outlook that fell short of analysts' estimates. In regular trading, Texas Instruments closed at $34.27, up 1 percent, on the New York Stock Exchange.

Retailers could struggle on Tuesday after Target (TGT.N) cut its October sales outlook for stores open more than a year, in a statement after the closing bell.

BANKS, BUILDERS AND BARGAINS

Financial shares, the group that was hammered the hardest on Friday, bounced back in regular trading on Monday as investors sought out bargains.

Bank Wells Fargo & Co (WFC.N) rose 2.9 percent to $33.82 and investment bank Goldman Sachs (GS.N) added 2.1 percent to

$222.18.

Dow component American Express (AXP.N) gained 2 percent to $58.30 in after-hours trading after the credit card and travel services company reported a quarterly profit that beat expectations.

The Dow Jones U.S. home construction index .DJUSHB was up 6.6 percent, marking its best day in a month. Builder D.R. Horton (DHI.N) climbed 6.9 percent to $12.77 and Pulte Homes (PHM.N), set to report earnings on Wednesday, gained 8.7 percent to $14.86.

"Even on Friday, the home builders held on to the bitter end and were one of the best-performing groups," said Tim Biggam, lead options strategist at online brokerage thinkorswim, in Chicago. "What we are seeing today is classic value investing, combined with short covering, which many times can signal market bottoms."

On the downside, Schering Plough SGP.N reported profit and sales that fell short of Wall Street's targets. Its stock was down 13.4 percent at $28.34.

Oil stocks also sagged as crude oil prices retreated from the $90-a-barrel level on concern that a slowing economy will crimp demand for energy.

Exxon Mobil (XOM.N) shares slid 1.3 percent to $90.91 and oil field services firm Schlumberger's (SLB.N) stock was off 4 percent at $95.34.

Trading was moderate on the NYSE, with about 1.40 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.03 billion shares traded, just above last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 6 to 5 on the NYSE and by 3 to 2 on Nasdaq.

(Additional reporting by Doris Frankel)