US STOCKS-GM's sales surprise lifts Wall St, Starbucks up late
(Updates with Starbucks share move after the bell)
* GM shares jump on stronger-than-expected June sales
* Financial shares turn around on bargain-hunting
* Higher oil stirs caution
NEW YORK, July 1 (Reuters) - U.S. stocks rose on Tuesday, after embattled automaker GM GM.N surprised Wall Street with stronger-than-expected June sales and financial shares reversed earlier losses as investors scoured for bargains, overshadowing concerns about record oil prices.
The modestly positive start to the third quarter followed the Dow Jones industrial average's worst first six months since 1970.
General Motors' GM.N shares rose 2 percent and were the catalyst for the broad market's turnaround in the afternoon. GM's sales helped ease some concerns about the impact of high fuel costs on the U.S. economy.
Financial shares, which had earlier led decliners in the S&P 500, turned higher in afternoon trading. UBS upgraded credit card companies American Express (AXP.N), Capital One Financial Corp (COF.N) and Discover Financial Services (DFS.N) to "neutral" from "sell," saying the stock valuations now largely reflect the difficult operating outlook
But concerns about inflation continued to weigh on the market. U.S. crude oil futures CLc1 closed at a record $140.97 a barrel on Mideast tensions and supply concerns raised by a report from the International Energy Agency.
"Two letters: GM. We're oversold and so with so many people looking for that bounce, any news that is a little better than expected is going to get a bit of a rebound going," said Joe Saluzzi, co-manager at Themis Trading in Chatham, New Jersey. "People were just looking for a reason to jump in and buy the beaten-down stocks."
The Dow Jones industrial average .DJI rose 32.25 points, or 0.28 percent, to 11,382.26, again avoiding closing in bear market territory.
The Standard & Poor's 500 Index .SPX gained 4.91 points, or 0.38 percent, to 1,284.91. The Nasdaq Composite Index .IXIC advanced 11.99 points, or 0.52 percent, to 2,304.97.
In trading after the closing bell, Starbucks Corp (SBUX.O) shares rose more than 3 percent to $16.14 after the coffee store operator said it is increasing planned store closures and will cut as many as 12,000 jobs.
During the regular session, GM's stock rose 2.2 percent to end at $11.75 on the New York Stock Exchange. Immediately after the company released its sales for June, GM's stock had jumped more than 10 percent to a session high at $13.22.
But GM's positive surprise was the exception, not the rule. Ford Motor Co (F.N) and Chrysler LLC were among those feeling the deep pain of higher gasoline prices and posted poor June sales. Ford shares shed 2.1 percent to $4.71.
A report by the Institute for Supply Management showed U.S. manufacturing expanded in June for the first time in five months, helped by a weak dollar, but inflation pressures soared to their highest since the stagflation-ravaged 1970s.
Apple (AAPL.O) shares rose 4.3 percent to $174.68 and were the top boost to the Nasdaq, after Sanford C. Bernstein raised its price target on the iPod maker's stock.
Among financial shares, Lehman Brothers LEH.N rose 5.8 percent to $20.96, after Morgan Stanley recommended investors buy the investment bank's beaten-down shares.
American Express shares rose 6.2 percent to $40.02 and were the top contributor to the Dow's gains. Capital One Financial shares rose 5.6 percent to $40.14 and Discover Financial shares gained 6.3 percent to $14.
An index of S&P financial stocks .GSPF rose 1 percent.
Shares of commercial lender CIT Group Inc (CIT.N) skyrocketed 29.7 percent to $8.83 after the company agreed to sell its home lending business and other housing portfolio holdings.
Apart from the ISM data, a report by the government showed U.S. construction spending fell 0.4 percent in May as home building continued to deteriorate. The data will add to concerns that the United States has entered a period of weak growth accompanied by high inflation.
Trading was moderate on the New York Stock Exchange, with about 1.64 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.67 billion shares traded, well above last year's daily average of 2.17 billion.
Despite stocks' moderate gains on Tuesday, the market's breadth was negative. Declining stocks outnumbered advancing ones by a ratio of about 3 to 2 on both the NYSE and the Nasdaq.
(Editing by Jan Paschal)
