Dow closes up 27 after a seesaw day

A late buying surge gave investors a little something to cheer about today.

The Dow Jones industrials and the Standard & Poor's 500 Index finished with small gains. At the close, the Dow was up 27 points to 12,813. The S&P 500 was up 5 points to 1,416.

The gains were welcome after Friday's drubbing that saw the Dow fall 256 points.

But tech stocks struggled most of the day, and the Nasdaq Composite Index finished down 5 points to 2,499 -- its seventh consecutive loss.

After the close, Starbucks (SBUX, news, msgs) shares jumped nearly 9% to $20 after the company said Chairman Howard Schultz will become CEO again, replacing Jim Donald. The company also will slow its U.S. growth plans and close underperforming stores and improve existing stores.

Starbucks' moves come as competition is intensifying with McDonald's (MCD, news, msgs).

The Starbucks news came after a day that saw bulls and bears battling for control of the market, and the tentative nature of the finish suggested that the battle was hardly resolved.

The Dow had been up as much as 84 points and down as many as 66 points.

With today's finish, the Dow was down 3.3% this month and is down 9.4% from its all-time closing high of 14,164.53, set on Oct. 9.

The Nasdaq is down 5.8% this month and down 13% from its Oct. 31 high.

The small rally for the Dow and S&P 500 came as crude oil fell rather abruptly -- $2.82 a barrel to $95.09, thanks to a hit of warm weather in the Midwest and East. There were also worries that the U.S. demand for oil would slip as the economy slows down.

The strength of the market was in drug, tobacco and utility stocks -- additional evidence that many investors right now aren't very interested in risk.

Drug stocks are frequently seen as safer bets in down economies because patients need to buy medicines regardless of economic conditions.

Plus, biotech company Biogen Idec (BIIB, news, msgs) led biotechs higher after boosting its profit guidance for 2007 profits. The stock was up 7.2% to $59.22, tops among S&P 500 stocks.

The Amex Pharmaceutical Index ($DRG.X) was up 2.6% to 343 today. The Amex Biotechnology Index ($BTK.X) was up 2.1% to 790.

Meanwhile, the Nasdaq is suffering as big tech stocks like Apple (AAPL, news, msgs), Google (GOOG, news, msgs) and Research In Motion (RIMM, news, msgs) continue to be battered. The drubbing seems to be occurring because of what looks like massive profit-taking after big gains in all three stocks during 2007.

Apple was down 1.3% to $177.64 today. Google was off 1.2% to $649.25, and Research In Motion slid 3.4% to $99.83, its first close under $100 since Dec. 11.

Google has fallen 6.1% since Dec. 31 and is down 12.5% from its all-time high of $741.79 on its Nov. 6. Apple has fallen 11% from its closing high of 199.83 on Dec. 28. Research In Motion is down 25% since peaking at $133.03 on Nov. 7.

Twenty-one of the 30 Dow stocks were higher, along with 296 S&P 500 stocks and 50 Nasdaq-100 ($NDX.X) stocks.

Cigarette giant Altria (MO, news, msgs) was the Dow leader, up 3.1% to $77.23.

Student loan company SLM Corp. (SLM, news, msgs), better known as Sallie Mae, was up 7% to $17.83, second-best among S&P 500 stocks after Biogen Idec.

Sallie Mae's gain came after the company named Anthony Terracciano as its new chairman. He had been president of First Union, which is now Wachovia (WB, news, msgs).

Bear Stearns' CEO to step aside

Late today, The Wall Street Journal reported that James Cayne, the CEO of investment bank Bear Stearns (BSC, news, msgs), will step aside in favor of President Alan Schwartz. Cayne expects to remain as chairman.

Cayne has been under attack from shareholders as Bear Stearns' shares slumped 55% from a January 2007 peak of $169.23 as the subprime-mortgage crisis erupted. Bear Stearns closed Monday at $76.25.

Cayne has suffered right along with his shareholders. When the stock peaked at $169, Cayne owned 6.4 million shares, making his stake worth nearly $1.1 billion. He has sold some shares since, and his remaining stake of about 5.6 million shares is worth about $427 million.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$95.09	$97.91	-$2.82	-0.93%	-0.93%
Heating oil (per gallon)	$2.5935	$2.6835	-$0.0900	-2.11%	-2.11%
Natural gas (per million BTU)	$7.8790	$7.8410	$0.0380	5.29%	5.29%
Unleaded gasoline (per gallon)	$2.4298	$2.5111	-$0.0813	-2.45%	-2.45%

A coffee war is erupting

Schultz's decision to take back the CEO reins at Starbucks came as it appears that the Great Coffee War of 2008 is set to erupt.

The war will pit Starbucks against McDonald's.

The fast-food giant plans to install coffee bars with baristas -- experts in preparing coffee drinks -- at nearly all of its 14,000 restaurants in the U.S., The Wall Street Journal reported today.

The move is part of the fast-food chain's continued effort to challenge Starbucks' dominance in the coffee market.

Investors warmed up to the idea of a coffee war: Shares of McDonald's moved up 1.7% to $58.03. Starbucks shares were up 1.5% to $18.38 on the day.

• Get free, real-time stock quotes on MSN Money

The new McDonald's coffee bars will offer a variety of coffee beverages, including cappuccinos and mochas, as well as a Frappe -- an iced drink that will be similar to Starbucks' Frappuccino, the paper reported.

McDonald's drinks will cost 60 to 80 cents less than other coffee shops charge, according to the company's advertisements in test markets, the paper added. And the drink sizes will be in plain English -- none of Starbucks' small "talls."

• Why Wall Street likes the McDonald's attack on Starbucks

In addition to replacing Donald and trimming back the number of new stores it opens, Starbucks plans introduce new products and improve training for baristas.

Starbucks has struggled in recent months as consumers have cut back on spending amid declining home values and higher fuel prices. Meanwhile, competitors like Dunkin' Donuts and McDonald's have cut into Starbucks' customer base by launching their own lines of gourmet coffee.

The company said it plans to take some of the capital originally intended for U.S. store growth and use it to accelerate its international expansion.

Gates makes tech predictions

What's next for tech? According to Microsoft (MSFT, news, msgs) Chairman Bill Gates, it's "natural user interface."

Gates kicked off the International Consumer Electronics Show in Las Vegas on Sunday with his 11th keynote speech, saying that devices that are "user-centric" will be the wave of the future. (Microsoft is the publisher of MSN Money.)

• Video: What's next for 2008?

In his speech, Gates announced a partnership with Ford Motor (F, news, msgs) to create a voice-activated system to control the use of technology in a car. He also said Microsoft had secured deals with General Electric's (GE, news, msgs) NBC Universal to help develop NBC's Web site for the 2008 Olympics in China this summer.

Gates didn't leave out his competitors: He mentioned Apple's iPhone as an important development in the next generation of technology.

• Top Stocks blog: At least the Microsoft video rocked

This year's CES -- the show where technology companies introduce new gadgets and devices -- will be Gates' last, as he will step down from his position at Microsoft this summer.

Microsoft shares closed up 0.7% to $34.61.

IBM falls on a downgrade

IBM Corp. (IBM, news, msgs) and Network Appliance (NTAP, news, msgs) were downgraded to "neutral" from "buy" today at UBS. The analyst cited slowing spending in 2008. IBM shares fell 1% to $100.05; Network Appliance fell 6% to $22.91.

Electronics retailer Best Buy (BBY, news, msgs) was downgraded to "underperform" from "outperform" this morning by Bear Stearns analyst Christopher Horvers. The analyst said Best Buy is vulnerable to an economic slowdown that could hurt the sales of high-margin products. Many of its hot-selling products will face competitive pressures in 2008.

Shares of Best Buy were down 0.7% to $47.14.

Eli Lilly (LLY, news, msgs) was upgraded to "equal weight" from "underweight" at Morgan Stanley. Shares of the drug giant were up 5.3% to $54.55 on the news. It was the fifth-best S&P 500 performer on the day.

Recession worries grow

Worries about a recession grew after the dismal jobs report, and many economists believe that a recession this year is more likely than not.

"I have been saying about 50%," Harvard University economist Martin Feldstein told Bloomberg News over the weekend. Friday's jobs report "now pushes it up a bit above that."

"We're about to tilt over to the other side of the economic curve and begin the downswing," Bernard Baumohl, economist at the Economic Outlook Group, told The Wall Street Journal. "The only real question now is whether the economy will contract for one or two quarters."

President Bush has indicated that he might introduce plans to help bolster confidence in the economy.

But not everyone is convinced that any such plan would help.

"My sense is that even though the government wants to be seen as reactive, there is not that much they can do at this point," said Raghuram Rajan, a University of Chicago professor of finance, at the American Economic Association's two-day meeting over the weekend, according to MarketWatch.com.

"Monetary policy has lags of a year. It can't revive lending that isn't taking place because banks have capital constraints," added Rajan, former chief economist at the International Monetary Fund.

Fed governor defends transparency plan

Federal Reserve Vice Chairman Donald Kohn spoke over the weekend about the central bank's new communications policy, which the Fed announced on Nov. 14.

"Our communication strategy is a work in process," Kohn told the National Association for Business Economics. The Fed is trying to provide more information than usual to reduce uncertainty about the central bank's intentions, he said. That's especially important when the Fed's view of the macroeconomic situation changes materially between meetings of the Fed's rate-making body, the Federal Open Market Committee.

• Video: What to do if you face foreclosure

The Fed has been under fire for how it has dealt with the mortgage-market meltdown and the credit crunch. The Fed's lowering of the federal funds rate and the discount rate by only a quarter of a point, respectively, in December sent stocks tanking and caused some to worry "that the Fed doesn't get it," Jeffrey Kleintop, chief market strategist at LPL Financial Services, told Bloomberg News at the time.

Fed chief Ben Bernanke is speaking on Thursday in Washington, D.C. The Fed will meet to discuss interest rates at the end of the month. Most economists expect the Fed to cut rates by at least a quarter of a percentage point.

Dividends could slow this year

Investors who bank on their dividend payments may have reason to worry this year.

Fewer companies increased their dividends in 2007 from 2006 levels, according to Howard Silverblatt, senior index analyst at Standard & Poor's -- and things got worse in the fourth quarter.

• Video: Is the UK economy catching the US cold?

More than 1,800 companies -- 1,857 in all -- boosted their dividends, but that's 6% fewer than the number of companies that increased dividends in 2006. Dividend increases fell 11% in the fourth quarter of 2007 to 432, from 483 in the same period in 2006.

Strained by the credit crunch, many companies, including Freddie Mac (FRE, news, msgs) and Washington Mutual (WM, news, msgs), have slashed their dividends to help boost capital. Rumors have circulated that banking giant Citigroup (C, news, msgs) could be forced to do the same after writing down $11 billion in the fourth quarter of 2007.

Short hits from the markets -- 4 p.m.

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	3.165%	3.115%	0.050	0.80%	0.80%
5-year Treasury note yield	3.157%	3.169%	-0.012	-8.63%	-8.63%
10-year Treasury note yield	3.839%	3.854%	-0.015	-4.86%	-4.86%
30-year Treasury bond yield	4.336%	4.359%	-0.023	-2.76%	-2.76%
Currencies
U.S. Dollar Index	76.20	75.82	0.38	-0.65%	-0.65%
British pound in dollars	$1.9704	$1.9697	0.0008	-0.95%	-0.95%
Dollar in British pounds	£0.5075	£0.5077	-0.0002	0.95%	0.95%
Euro in dollars	1.4697	1.4702	-0.0004	0.56%	0.56%
Dollar in euros	€ 0.6804	€ 0.6802	0.0002	-0.56%	-0.56%
Dollar in yen	¥109.18	¥109.22	-0.04	-2.39%	-2.39%
Commodities
Gold	$862.00	$865.70	-$3.70	-0.43%	2.86%
Copper	$3.1410	$3.1575	-$0.02	-0.52%	3.29%
Silver	$15.2900	$15.4620	-$0.17	-1.11%	2.48%
Crude oil (NYMEX) (per barrel)	$95.09	$97.91	-$2.82	-2.88%	-0.93%

By Charley Blaine and Elizabeth Strott