For the first time in a long time, Old Economy and New Economy stocks are acting like friends instead of foes. And the peacemaker -- maybe mediator is more appropriate -- is none other than Microsoft (MSFT) - Get Report.

News reports that the tech behemoth may be nearing a conclusion of its antitrust settlement talks with the government were helping to spread green across the major proxies. The stock was lately up 7 1/2 to 110 3/4. The

Dow Jones Industrial Average

component accounted for about 37 points of the blue-chip measure's gain of 148, or 1.4%, to 11,015.

The broader

S&P 500 index

was up 18, or 1.2%, to 1519, and the small-cap

Russell 2000

was 5, or 0.9%, to 577.

Technology stocks in general were getting a lift on the news, with the tech-laden

Nasdaq Composite Index

up 87, or 1.8%, to 4952. Other tech bellwethers were also showing strength, including

Oracle

(ORCL) - Get Report

up 2.5% and

Cisco

(CSCO) - Get Report

whose 2-for-1 stock split became effective today. Cisco was gaining 3.6%.

"Techs are getting a boost from Microsoft, Cisco's split buoyed the market, and there's follow-through from yesterday," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee, summing up what is a fairly quiet day overall.

"There is not a lot going on. There's a lot of complacency," said David Baker, head of program trading at

Deutsche Bank

. "People are trying to digest what the heck went on," he said referring to the Nasdaq's hefty 253-point gain over the past two days and to the sharp run-up in biotechnology and semiconductor stocks in particular. The

American Stock Exchange Biotech Index

hopped 10% yesterday, while the

Philadelphia Stock Exchange Semiconductor Index

jumped 9.2%. (The Amex biotech index lately was down 0.8%, while its Nasdaq counterpart was off 2.7%.) All of the action comes on the heels of the latest 25-basis-point rate hike from the

Fed

.

Financial stocks got a lift from

Morgan Stanley Dean Witter's

(MWD)

robust first-quarter earnings report. The company said first-quarter profits rose 49%, driven by record results in its stocks businesses and strong investment banking fees. Earnings per share of $1.34 were well above the 12-analyst estimate of $1.06 and up from the year-ago 88 cents. Despite the boost to the rest of the financial sector, Morgan Stanley was lately weakening 2.5%.

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J.P. Morgan

(JPM) - Get Report

was showing strength, lately up 3.2%, while

Chase Manhattan

(CMB)

was up 3.2%. The

American Stock Exchange Broker/Dealer Index

was up 2.9%.

FedEx

(FDX) - Get Report

also turned in a strong third-quarter earnings report despite soaring fuel prices. Shares were flying 2 15/16, or 7.9%, to 40 3/16. The

Dow Jones Transportation Average

was also in the green, up 1.8%.

Now that the latest Fed rate hike is out of the way, said Marshall Acuff, portfolio strategist at

Salomon Smith Barney

, "I think the market is mostly focused on near-term earnings results." He noted the reaction to

General Electric's

(GE) - Get Report

recent forecast of better-than-expected profits. "I think for a lot of people, stronger-than-expected growth is somewhat synonymous with high-tech. That has been the catalyst" for some of the very recent returns to that sector, said Acuff. "Growth continues to be the dominant thing as opposed to value."

Paper stocks were also racking up gains with the

Philadelphia Stock Exchange Forest & Paper Products Index

moving up 4.1%.

International Paper

(IP) - Get Report

popped 6.7% and

Georgia-Pacific

(GP)

rose 3.5% after the companies said they would form a B2B paper product marketplace.

The 10-year Treasury was up 28/32 to 103 15/32, its yield at 6.03%, while the 30-year Treasury was up 1 7/32 to 105 5/32, its yield at 5.88%.

Market Internals

Breadth was positive on both major exchanges on moderately heavy volume.

New York Stock Exchange:

1,633 advancers, 1,178 decliners, 619 million shares. 71 new 52-week highs, 21 new lows.

Nasdaq Stock Market:

2,094 advancers, 1,894 decliners, 1 billion shares. 93 new highs, 51 new lows.

For a look at stocks in the midsession news, see Midday Movers, published separately.