Updated from 4:07 p.m. EDT

Stocks again staged a late-session mini-rally to close higher, as investors were able to shake off a terrorism alert on the eve of the Sept. 11 anniversary.

The

Dow Jones Industrial Average

gained 83.23 points, or 1.0%, to 8602.61. The

Nasdaq

rose 15.5 points, or 1.2%, to 1320.1 and the

S&P 500

gained 6.6, or 0.7%, to 909.6. Over the past three days, the Dow has gained 3.9%, the Nasdaq gained 5.5%, and the S&P 500 is up 2.7%.

The week has been one of reflection on Wall Street, as the area remembers men and women lost in the Sept. 11 attacks. Analysts predict subdued trading at least through Wednesday, when the exchanges will open 90 minutes late after ceremonies in lower Manhattan and elsewhere.

The prospect of terrorism reared its head late Tuesday, the State Department warning Americans at home and abroad to use extra caution as the Sept. 11 anniversary approaches. U.S. government officials said the country's alert level was "code orange," the second-highest warning level and highest level of concern since last September's attack.

"It

was pretty light trading out there, and there's really not much going on," said Giri Cherukuri, head trader, Oak Brook Investments. "People are just thinking about tomorrow, which is also going to be very light trading. People will be out for memorial services and thinking about other things."

Volume was anemic, but slightly better than yesterday, with the NYSE trading 1.15 billion shares and the Nasdaq trading 1.26 billion. The underlying trend was negative. Decliners topped advancers on the Big Board and Nasdaq by a small margin.

Tech investors got about what they expected from

Nokia's

(NOK) - Get Report

midquarter update. The Finish cell phone maker predicted third-quarter revenue would be slightly below previous forecasts, but said earnings would be at the high end of its range. Nokia's handset division, the biggest in the world and accounting for 70% of the company's total sales, expects revenue growth of 4% to 9% in the quarter, slightly better than expected. But sales in the network-equipment division are expected to fall 5% from a year ago. Nokia fell 2.2% to $13.87.

While wireless names continued to struggle, a mini-rally in Internet stocks continued for the third straight day. From Thursday's close to the midday of this session, Cherukuri noted,

Yahoo!

(YHOO)

gained 13.8%,

Amazon

(AMZN) - Get Report

jumped 20.2% and

eBay

(EBAY) - Get Report

added 9.4%. "There hasn't been any news for these stocks, but I think there may be some bargain hunting going on," he said. "Also, optimism for a good quarter may be contributing to the gains."

Semiconductors posted gains as well, with the

Philadelphia Semiconductor Index

up 3.6%.

AMD

(AMD) - Get Report

and

Xilinx

(XLNX) - Get Report

rose more than 3.7% each.

Select drugmakers and biotechnology names were lower.

Genentech

(DNA)

was a notable decliner, dropping 9.7% to $28.89 after announcing that Phase III trials of breast cancer treatment Avastin didn't meet its primary efficacy standpoint. Solomon Smith Barney downgraded the company to inline from outperform, slashing its price target to $28 from $40.

King Pharmaceuticals

(KG)

was cut to equal weight from overweight by Morgan Stanley, which also lowered its price target to $24 from $31. Morgan advised investors to seek companies with better long-term earnings visibility. As a result, King dropped 5.9% to $20.09.

Morgan Stanley also downgraded

Sepracor

(SEPR)

to underweight from equal weight, warning investors to stay away from its stock until news about drugs in its pipeline improves. Sepracor fell 6.4% to $5.16 on the downgrade.

Elsewhere in the drug sector,

AstraZeneca

(AZN) - Get Report

dropped 0.7% to $31.92 as concerns grew about generic competition for Nexium, its next-generation ulcer treatment. And

Forest Labs

(FRX)

bucked the overall trend, gaining 4.3% to $76.19, after announcing positive results for its treatment of Alzeheimer's disease.

The airline industry struggles continue. J.P. Morgan reduced fiscal 2002 and 2003 estimates for five major carriers well below Wall Street consensus, telling investors that the magnitude of losses in the fourth quarter and 2003 could be surprising. American Airlines parent

AMR

(AMR)

,

Continental

(CAL) - Get Report

,

Delta

(DAL) - Get Report

,

Northwest

(NWAC)

and United parent

UAL

(UAL) - Get Report

were all affected.

The American Stock Exchange Airline Index dropped 2%.

Some of Monday's bigger winners, like commodity-related stocks and other defensive plays, were lower. The

Philadelphia Gold & Silver Index

fell 5.3%, following the price of December gold futures, which dropped $3.40 to $319.40. And the Dow Jones Utility Average continued its ascent, falling 2.3%. Over the last nine sessions, including today's action, utilities have fallen more than 10%

After gaining 1.9% yesterday,

Raytheon

(RTN) - Get Report

fell 4.7% to $35.26 on news that it will fall short of delivery targets for its Premier 1 business jet.

Treasury bonds rallied, with the 10-year note gaining 14/32, lowering its yield to 4.00%.

European stocks ended higher, with London's FTSE 100 up 2.8% to 4175 and Germany's Xetra DAX up 1.9% to 3495. In Asia, Japan's Nikkei finished little changed, while Hong Kong's Hang Seng rose 1.7% to 9886.