Market Update: Dow Closes Just Off 11K; Nasdaq Gains 1.9% - TheStreet

(Updated from 4:08 p.m.)

Stocks closed on a positive note today after Wall Street digested two economic reports released this morning. The

Dow Jones Industrial Average finished off the day just a hair off the key level of 11,000 after an afternoon rally.

The Dow closed up by 78.5 points, or 0.7%, to 10,990.4; the

Nasdaq Composite Index ended the day by keeping its morning gains -- it was up almost 39 points, or 1.9%, to 2149.4. The broader

S&P 500 gained 4.9 points, or 0.4% to 1260.7.

The market reacted today to the

employment report, which showed the first drop in the unemployment rate in eight months, and the

purchasing managers' index, which showed

continued weakness in the manufacturing sector.

The Dow was helped all over, but especially by some of its tech stocks:

Intel

(INTC) - Get Report

closed up 6.4% to $28.74; Microsoft was up 1.7% to $70.34 and

IBM

(IBM) - Get Report

was up almost 1% to $112.89. On the tech-heavy Nasdaq, chip and PC stocks performed best. Transportation, natural gas and insurance stocks were among the day's weakest sectors.

A midday lift didn't take the Comp any higher than it was in the morning, though.

"I think you know it's a big guessing game," said Patrick Boyle, head of financial trading at

Credit Suisse First Boston

. "Will

Greenspan intervene past June or not? And on the horizon, we have second-quarter confessions, which begin next week."

Today's economic numbers have not really altered expectations for an interest-rate cut when the

Federal Reserve meets on June 26 and 27. The

fed funds futures are currently putting a 90% chance on a 25 basis-point cut at the coming meeting. Yesterday, they were pricing in a 92% chance. If the Fed does move again, it will be the sixth rate cut since the year began.

For the first time in eight months, the monthly unemployment rate fell month to month, declining to 4.4% in May from 4.5% in April. Nonfarm payrolls decreased by 19,000, though, slightly higher than economists' expectations for a 17,000 decline. Job losses were concentrated in the manufacturing sector, which shed 124,000 jobs in May, compared to 113,000 in April. Since last July, 675,000 manufacturing jobs have been lost, with more than two-thirds of that decline occurring since December.

The purchasing managers' index for May fell to 42.1. The survey -- of approximately 300 purchasing executives nationwide -- measures conditions in the factory sector. A reading of 50 or above signals expansion, while a measure below 50 signals contraction. The index has not been above 50 since July 2000. The latest reading is lower than last month's and the 43.5 that economists had expected.

Earnings Concerns

Meanwhile, earnings worries have been looming over the market since

Sun Microsystems

(SUNW) - Get Report

warned on Tuesday that it would miss its second-quarter targets, kicking off the

second-quarter confession season. Sun closed up today by almost 1% to $16.63.

The latest round of earnings news was mixed. Filing into the confession pew, chipmaker

Altera

(ALTR) - Get Report

after the close yesterday

lowered its revenue guidance for the second quarter, citing lower-than-expected international sales. But in a conference call last night, chip-equipment maker

Novellus

(NVLS)

maintained its prior financial guidance for the second quarter. There had been some buzz on Wall Street that the company would warn.

Shares of Altera closed up 4.6% to $25.11, while Novellus gained 5.2% to $50.40.

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