Dow Holds Modest Gain to Close Higher; Nasdaq Sheds 2%

Compaq and H-P are both lower on their merger agreement.
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Updated from 3:38 p.m. EDT

Blue-chips closed higher, but they were well off their session highs by the time the trading day was over. The

Dow Jones Industrial Average

gained 47.74 points, or 0.5%, to 9997.49. The Dow had been above the 10,000 level for much of the day, reaching an intraday high of 10,182.38. The

Nasdaq

finished down 34.56 points, or 1.9%, to 1770.87, and the

S&P 500

was off half a point to 1132.95.

Hewlett-Packard

(HWP)

and

Compaq

(CPQ)

which have

agreed to merge in a stock deal valued at about $25 billion, both closed lower. Carleton Fiorina, the chairman and chief executive of Hewlett-Packard, will become the new company's chairman and CEO, while Compaq's chairman and CEO, Michael Capellas, will become president of the new entity. Compaq was the most active stock on the

New York Stock Exchange

, trading down $1.27, or 10.3%, to $11.08. H-P was down $4.34, or 18.7%, to $18.87. Both issues struck fresh 52-week lows Tuesday.

Lucent

(LU)

was also among the most active, trading down 30 cents, or 4.4%, to $6.52.

Johnson & Johnson

(JNJ) - Get Report

had a strong session, rising $3.44, or 6.5%, to $56.15.

But investors took notice at 10 a.m. EDT, when the National Association of Purchasing Managers released its monthly index, which came in better than expected at 47.9. Economists, on average, were expecting a reading of 44. The number signals expansion when above 50 and contraction when below.

The 10-year benchmark Treasury note was down 30/32 to 100 10/32, yielding 4.959%. In currencies, the dollar enjoyed its biggest one-day run-up in nine months.

Overseas markets were higher. London's FTSE 100 finished the day up 68 points, or 1.3%, to 5380. In Japan, the Nikkei 225 closed up 363 points, or 3.5%, at 10,773. Hong Kong's Hang Seng rose 234 points, or 2.2%, to 11,137.