Nasdaq Closes Above 2,000 in Late Rally

NEW YORK – Stocks rose in a last-minute technology rally Wednesday, with investors buying up shares in network gear makers like Juniper Networks (JNPR), but interest-rate jitters curbed gains by blue chips and the Standard & Poor's 500.

The technology-laced Nasdaq Composite Index (search) rose 26.83 points, or 1.35 percent, to 2,020.98. The Dow Jones industrial average (search) gained 84.50 points, or 0.81 percent, to 10,479.57, its highest close since mid-April. The Standard & Poor's 500 Index (search) also posted its highest close since mid-April, up 9.63 points, or 0.85 percent, at 1,144.04.

A pullback in crude oil prices, which slumped on an unexpectedly big rise in U.S. crude oil inventories, helped soothe some of Wall Street's jitters.

Plans for hefty technology investments by Sprint Corp. (FON) and SBC Communications Inc.(SBC), both announced on Tuesday, were fueling investors' appetite for telecommunications-related shares, said Jack Caffrey, equity strategist at J.P. Morgan Private Bank.

"You have some investors focusing on the idea that the tech upswing still has some legs to it," Caffrey said.

The market staged a late-day rally as portfolio managers, encouraged by the the market's recent stability, put fresh money to work.

"We've had positive mutual fund inflows in the last few weeks and this is more just a reflection of it," said John O'Donoghue, head of listed trading at Credit Suisse First Boston.

The late-session rally pushed both the Dow and the Nasdaq back up into the plus column for the year to date, with the Dow now up 0.25 percent and the Nasdaq up 0.88 percent. The S&P 500 is up 2.89 percent for 2004.

Gains were limited, however, as investors fretted about looming interest-rate hikes. The Fed's policy-setting arm meets on June 29-30, next Tuesday and Wednesday, and is expected to start a tightening cycle by raising its short-term fed funds rate target by a quarter percentage point next Wednesday.

"There are a whole number of issues that the market needs to contend with," Caffrey said. "A range-bound market makes sense, given all the uncertainty."

Anxiety about the U.S. handover of power in Iraq next Wednesday is also expected to keep a lid on volume, extending the market's sideways movement, analysts said.

The United States is due to transfer power to an interim Iraqi government on June 30, a date that many fear could be marked by a spike in violence. Increased turmoil in Iraq could cause already high oil prices to rise further and heighten instability in the Middle East.

The next major development to propel stocks higher may not come until companies start reporting their second-quarter earnings next month. Until then, investors will be closely monitoring corporate forecasts and economic numbers, including the weekly labor market figures due Thursday, and the government's report on gross domestic product Friday.

Shares in networking equipment makers were broadly higher, led by Juniper and Ciena Corp. (CIEN). Investors placed bets on who might benefit from SBC Communications Inc.'s 5-year plan to expand its fiber-optic network with an investment of $4 billion to $6 billion.

Juniper jumped 12 percent, or $2.49, to $23.35, and Ciena surged 13 percent, or 41 cents, to $3.54.

"We believe SBC's announcement could be positive for broadband access vendors ... but there still remain many hurdles and we would not expect to see significant revenues until (the first half of) 2005," Goldman Sachs analyst Brant Thompson said in a note.

Sprint Corp. said Tuesday it would invest about $1 billion, mostly in 2005, to develop high-speed wireless data services.

FedEx Corp. (FDX) added $1.62 to $80.05 after the package delivery company reported better than expected earnings on steady demand for ground services and international shipments.

R.J. Reynolds Tobacco Holdings (RJR) soared $2.43 to $68.33 on news its proposed $2.6 billion merger with Brown & Williamson has been approved by the Federal Trade Commission. The combination of the nation's second- and third-largest cigarette makers still must be approved by the Securities and Exchange Commission and RJR shareholders. British American Tobacco PLC (BTI), the parent company of B&W, was up $1.35 at $32.12.

Online auction giant eBay Inc. (EBAY) rose $1.14 to $88.35 after announcing plans to buy Baazee.com Inc., the most popular online shopping site in India, for $50 million. Internet usage is low in the world's second most populous country, but eBay is betting it will rise.

Wal-Mart Stores Inc. (WMT) dragged on the Dow a day after a federal judge certified a class-action lawsuit charging Wal-Mart discriminated against female workers, which analysts said could mean billions in potential costs for the world's largest discount retailer. Wal-Mart slid 0.9 percent, or 48 cents, to $53.58.

Mylan Laboratories Inc. (MYL) shares fell sharply, after the drugmaker suspended its annual earnings forecast and said it would sue the U.S. Food and Drug Administration to restore approval of a generic pain-relief patch. Mylan shares dropped $1.96, or 8.7 percent, to $20.46.

Salesforce.com (CRM) led percentage gainers on the NYSE, surging almost 38 percent in its first day of trading. Shares of Salesforce, which sells Internet-based software, rose to $15.20 from an initial public offering price of $11.

Trading was active, with 1.4 billion shares traded on the New York Stock Exchange and 1.8 billion shares traded on Nasdaq. Advancers outnumbered declining stocks by about 23 to 10 on the NYSE, and by about 21 to 11 on the Nasdaq.

The Russell 2000 index, which tracks smaller company stocks, was up 8.26, or 1.4 percent, at 580.15.

Overseas, Japan's Nikkei stock average finished 0.01 percent lower Wednesday. In Europe, France's CAC-40 rose 0.5 percent, Britain's FTSE 100 added 0.4 percent and Germany's DAX index was up 0.4 percent.

Reuters and the Associated Press contributed to this report.