Buyers Re-Emerge on Wall Street

Updated from 4:04 p.m. EDT

Stocks rose sharply Tuesday as investors used a pair of encouraging economic reports as an excuse for bargain hunting. Blue-chips backed off their session highs in the final hour but still held solid gains, while tech stocks, which had borne the brunt of the recent selling, mostly held their ground.

The

Dow Jones Industrial Average closed up 126 points, or 1.3%, to 9946. The

Nasdaq gained 31 points, or 1.9%, at 1688, and the

S&P 500 was adding 11 points, or 1.1%, to 1077. The averages were only tentatively higher until the two pieces of economic data were released, both of which showed that while the pace of the economic recovery slowed, a turnaround is still underway.

According to the Conference Board, the

consumer confidence index slipped to 108.8 in April from 110.7 in March, but analysts were expecting a slightly steeper decline. In a statement, the Conference Board said consumer expectations "remain virtually undaunted and signal continued expansion in the months ahead."

Separately, the

Chicago purchasing managers' report revealed that business activity in the Midwest dropped slightly in April. The Chicago purchasing managers' index fell to 54.7 this month from 55.7 in March. Economists weren't expecting the decline, but the number still pointed to expansion in the factory sector because it remained above 50.

A flurry of news surrounding big corporations was also influencing trading, including word that

WorldCom's

(WCOM)

chief executive resigned.

The telecom sector has been reeling for months as investors worried about issues including debt loads and overcapacity, and one of the hardest hit companies of late has been WorldCom. The stock traded up 6% to $2.48 after Chief Executive Bernard Ebbers stepped down under pressure from the board. Ebbers will be replaced by the company's vice chairman, John Sidgmore. Shares of WorldCom are down more than 80% year to date.

Another embattled telecom outfit,

Qwest Communications

(Q)

, reversed course and climbed 1.4% to $5.03. The stock was initially lower after the company said its quarterly loss widened dramatically because of the weak economy and slumping sales of its data services products. Qwest, which is being investigated by federal securities regulators, posted a first-quarter loss including charges of $698 million, or 42 cents a share, compared with a loss of $46 million, or 3 cents a share, a year earlier. Revenue for the quarter fell 13.5% to $4.37 billion. Excluding charges, Qwest lost 10 cents a share, compared with a profit of 13 cents a share in the year-ago quarter.

Dow component

Procter & Gamble

(PG) - Get Report

offered a fairly positive quarterly report, but the stock wasn't rising as sharply as the rest of the Dow. Lately, shares of P&G crept up 0.3% to $90.26. The consumer products maker reported fiscal third-quarter earnings that beat analysts' expectations by a penny, thanks to strong sales of shampoo and perfume, while the overall top line rose to $9.9 billion from $9.5 billion in the year-ago period.

A pair of stocks under selling pressure were in the pharmaceutical sector. Drugmaker

Eli Lilly

(LLY) - Get Report

said it received an approvable letter from the

Food and Drug Administration

for its impotence treatment Cialis, but the company doesn't expect to market the drug until 2003. As a result, Lilly lowered its 2002 earnings forecast.

Icos

(ICOS)

, which developed the drug with Lilly, saw its shares plunge 34.5% to $25.76. Lilly dropped 3.3% to $66.05. The American Stock Exchange Pharmaceutical Index was unchanged.

The chip sector was higher, with the Philadelphia Stock Exchange Semiconductor Index gaining 1.7%, but one notable loser in the group was

Micron Technology

(MU) - Get Report

, which fell 10.4% to $23.70. The stock slid after South Korea's

Hynix

rejected Micron's $3 billion offer to acquire its core operations.

Other major chip producers, including

AMD

(AMD) - Get Report

,

Intel

(INTC) - Get Report

and

Texas Instruments

(TXN) - Get Report

, were climbing. Another chip company,

Genesis Microchip

(GNSS)

shot up after the company reported a fourth-quarter profit on strong revenue growth. Shares of Genesis jumped 20% to $24.01.

Another big winner was energy trader

Dynegy

(DYN)

, which saw its shares jump 30% to $18 after the company reaffirmed its 2002 earnings guidance and met lowered expectations for its fiscal first quarter. The sharp rise in its stock price comes just one week after losing 50% of its value upon issuing a first-quarter profit warning.

In other corporate news, software giant

Microsoft

(MSFT) - Get Report

tacked on 2 cents to $52.26 following a report that the company is conducting talks to acquire Danish enterprise software company

Navision

for around $1.2 billion. And defense contractor

Northrop Grumman

(NOC) - Get Report

rose 4% to $120.66 after the company won a three-year $2.9 billion pact from the U.S. Navy to build up to 50 new ships for its aging fleet.

In Treasuries, the 10-year note was up 6/32 to 98 10/32, yielding 5.10%. The 30-year bond was the strongest issue.

Overseas markets were mixed. London's FTSE 100 was up 0.2% at 5166, and Germany's Xetra DAX added 0.6% to 5038. Japan's Nikkei 225 finished down 0.4% at 11,493, while Hong Kong's Hang Seng added 1.2% to 11,498.