Federal Reserve Chairman Alan Greenspan gave some positive news about inflation, but that battled for investors' attention with warning signs about corporate earnings. Also, Microsoft and AOL Time Warner continued to tussle over technology.
The Dow rose 71.10 to close at 11,061.50. The Nasdaq moved up, gaining 6.49 to 2,155.93.
Greenspan on Monday morning said there is "very little in the way of emerging short-term inflationary expectations." The chairman spoke to attendees at the International Monetary Conference in Singapore via a satellite hookup.
"What we see...at this moment is a very extraordinary lack of pricing power in the American economy, which means in effect that the cost increases are not following through into significant pressures on prices, but rather on profit margins," he said.
Microsoft and AOL have resumed talks over Microsoft's new Windows XP operating system. The two companies had been in negotiations regarding, among other things, whether to include AOL software in Windows XP and extend AOL's use of Microsoft's Internet Explorer Web browser.
In a swipe at AOL's dominance of the instant messaging field, Microsoft today released a test version of Windows XP that significantly boosts the abilities of its instant-messaging software to provide text, chat, video, audio and telephony services. Microsoft shares gained 44 cents to $70.78, and AOL fell 80 cents to $51.95.
Nortel Networks has authorized an option exchange program for its employees that will allow them to swap "underwater" options for new ones. Shares were up 59 cents to $14.
Analysts aren't expecting much from Intel's mid-quarter update Thursday. While the meeting is not expected to be revelatory, as Goldman Sachs analyst Terry Ragsdale put it, "We don't see how the news can be good." Still, analysts had better things to say about Intel than they did about rival AMD; Intel shares slipped 24 cents to $28.50, and Advanced Micro Devices fell $1.99 to $27.61
Compaq could have trouble meeting revenue estimates for its second quarter, analysts said Monday. J.P. Morgan analyst Walter Winnitzki pared his estimates for the company, citing the sluggish PC market. Merrill Lynch analyst Steve Fortuna issued a generally upbeat note on the company following a tour of its Houston headquarters, but he cautioned that the revenue figure could be at risk. Compaq shares rose 3 cents to $15.93.
Cypress Semiconductor warned investors that its second-quarter results would be lower than expected. The company cited the weakened semiconductor market, saying its revenue "has literally been cut in half over the last six months." The company now expects to see revenue of $175 million to $185 million, down 29 to 33 percent from the first quarter's $262 million, and below earlier forecasts of $200 million to $210 million. Shares were up 27 cents to $21.87.
Entrust Technologies, which makes security software, said it would cut about 400 jobs, or 30 percent of its work force, through layoffs and attrition. It will also close excess facilities and post a $400 million charge in the second quarter. Shares were down 44 cents to $6.
CheckPoint Software lost $5.88 to $49.29 on heavy volume, as investors reacted to rumors of lower-than-expected revenue. The company's chief financial officer denied the rumors.
A day ahead of its analyst meeting, Amazon.com was down 4 cents to $16.91.
Among leading volume movers, Cisco Systems rose 88 cents to $19.73 and Oracle rose 20 cents to $16.06.
CNET Investor staff and Reuters contributed to this roundup.