Microsoft rises, allowing broad market to gain

NEW YORK - Investors brushed off worries about Microsoft's future Monday, sending its shares higher and fueling a rally in technology stocks that spread to the broad market.

The Dow Jones industrial average rose 77.87 to 10,811.78 and the Nasdaq composite index rose 97.42 to 3,958.08.

Broader stock indicators were also higher. The Standard & Poor's 500 rose 15.82 to 1,468.25.

Microsoft rose 3 11/16 to 73 7/16 in the first session since the Justice Department asked a federal court to divide the company in two to satisfy antitrust concerns. Late Friday afternoon, the Justice Department and 17 states recommended splitting the company into one business for Microsoft's Windows operating-system software, and one for the company's applications products and Internet businesses.

The proposal was widely expected, and many investors determined that the possibility of a breakup had already taken its toll on Microsoft stock. Before Monday's session, Microsoft's share price had declined by about 40 percent since the start of the year.

''Whether split up, or not, the sum of the parts are worth around $125 to 135 a share,'' said Michael E. Stanek, a Microsoft analyst with Lehman Brothers. ''Therefore, investor objections of not owning the stock based on 'break-up' fears are no longer rooted in reality.''

Technology companies that compete with Microsoft were mostly higher. Red Hat, a seller of the Linux operating system, rose 2 13/16 to 27 7/8 and VA Linux rose 18 7/16 to 60 1/16.

Investors also resumed seeking bargains among the technology stocks that were pounded in a wave of selloffs in mid-April. Ciena, a designer of telecommunications networks, rose 16 7/16 to 140 1/16. Online information center About.com was up 15 5/16 to 49 5/8.

''Technology has taken back market leadership with a vengeance,'' said Joseph V. Battipaglia, chief investment strategist with Gruntal & Co. in New York. ''We washed out the market in April, and now investors are looking for stocks with strong earnings growth. That means tech stocks.''

Computer maker Hewlett-Packard rose 4 to 139, leading the Dow.

Outside the technology sector, merger activity stimulated trading. Rexall Sundown, a maker of nutritional supplements and health products, rose 4 3/16 to 23 7/16 after Dutch specialty foods company Numico NV agreed to acquire it for $24 a share.

Some modest support for the stock market came from the National Association of Purchasing Management, which said America's industrial sector grew for the 15th consecutive month in April. The group said the economy's growth came at a slower pace than in March, while prices for raw materials didn't rise as fast as in earlier months.

That offered some relief to inflation-wary traders. Most market watchers expect the Federal Reserve to raise interest rates for the sixth time in a year when it holds its next meeting on May 16. The indication of modest growth raised hopes that only a modest, quarter-point increase is in the cards.

''There's still a raging debate about what will come from the Fed,'' Battipaglia said. ''I think we need some more data before investors can figure exactly how high interest rates will go.''

Advancing issues outnumbered decliners by nearly a 2-to-1 margin on the New York Stock Exchange and by a 5-to-3 margin on the Nasdaq.

NYSE composite volume totaled 1.16 billion shares, compared with 1.18 billion in the previous session. The relatively low volume exacerbated price swings, causing most market barometers to shift dramatically over the course of the session.

The Russell 2000 index of smaller companies rose 12.68 to 518.93.

Overseas, Japan's Nikkei stock average rose 2.4 percent. European markets were closed in observance of May Day.

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