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At midday: Wall Street bounces but investors dump Facebook

U.S. stocks rose on Monday after their worst weekly decline for the year with signs investors were quickly exiting newly floated shares of Facebook Inc. following its broken IPO and redeploying capital elsewhere in the market.

Facebook's shares fell below their $38 (U.S.) issue price as support from underwriters of the initial public offering dissipated after its Friday debut. The stock dropped over $5 to hit a session low of $33.00 in early trading, last trading down 11.8 percent at $33.71.

That contrasted with a sizeable rally in shares of Apple Inc., which rose 2.8 per cent to $545.14. Apple's shares are off almost 15 per cent from a peak in April.

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"People were coming out of Apple to participate in Facebook," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago. "Facebook is not doing what they thought it would so maybe they'll take that capital back where they had it."

On Saturday, G8 leaders stressed that their "imperative is to promote growth and jobs" and gave verbal backing for Greece to stay in the euro. That helped lift the sentiment after failed elections in Greece lifted speculation that the country was headed toward exiting the euro zone.

"We sold off on some fear and not all of that fear was realized," said Mr. Lesh. "We're in a bit of an oversold bounce in here at the moment and whether we're going to build on all of this we'll find out this week; we'll still hostage to European news and will be for the foreseeable future."

The Dow Jones industrial average gained 82.27 points, or 0.67 per cent, to 12,451.65. The Standard & Poor's 500 Index rose 12.40 points, or 0.96 per cent, to 1,307.62. The Nasdaq Composite Index added 36.92 points, or 1.33 per cent, to 2,815.71.

Investors are watching 1,300 to 1,290 range on the S&P 500 as a major support level, the lower end of which was tested last week after the index fell 7.8 per cent since April. The bottom of the range coincides with the index's 10 month moving average.

"The ability to find support near 1,290-1,300 can trigger buyers to return, igniting the next sustainable rally towards our 2012 target in the mid-1,400s and possibly overshoot to low-1,500s," said technical analysts at UBS.

Facebook shares were expected to face tough trading this week if lead underwriter Morgan Stanley stops supporting the stock and managers lower down in the IPO book who were hoping for an early surge decide to get out before going underwater.

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"It was just a poorly done deal and it just so happens to be the biggest deal ever for Nasdaq and they pooched it, that's the bottom line here," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

In earnings news, Lowe's Cos Inc., the world's second-largest home improvement chain, cut its fiscal-year earnings outlook and said demand slowed toward the end of the traditionally strong first quarter. The shares fell 9.8 per cent to $25.69.

Yahoo Inc. shares rose 0.5 per cent to $15.50 after news that Chinese Internet entrepreneur Jack Ma is buying back up to half of a 40 per cent stake in his Alibaba Group from Yahoo for $7.1-billion in a deal that moves the Chinese e-commerce leader closer to a public listing.

The Nasdaq said it plans to implement procedures through which the Financial Industry Regulatory Authority (FINRA) will accommodate orders not executed in Facebook during the social media company's market debut on Friday. Nasdaq shares gained 2.6 per cent after falling more than 4 per cent on Friday.

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