Stocks Ride Microsoft's Coattails to Higher Close

The Nasdaq climbs 3.3%, and the Dow rises 2.1%. Bonds are well off their session highs.
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Updated from 3:05 p.m. EST

Even though signs of weakness were evident in economic data released Thursday, investors were in a mood to buy after word spread that the Justice Department and

Microsoft

(MSFT) - Get Report

were close to reaching a tentative deal to settle the government's antitrust lawsuit against the company.

The

Dow Jones Industrial Average gained 188.76 points, or 2.1%, to 9263.90. The

Nasdaq was up 56.10 points, or 3.3%, to 1746.30, and the

S&P 500 climbed 24.32 points, or 2.3%, to 1084.10.

The National Association of Purchasing Management released its latest

purchasing managers' index just after the opening bell. The data revealed a steeper-than-expected manufacturing contraction in October. Elsewhere, the Labor Department said first-time jobless claims fell by 10,000 in the most recent week.

Shares of software giant Microsoft traded up $3.69, or 6.4%, to $61.84. Among the most actives,

Sun Microsystems

(SUNW) - Get Report

rose 65 cents, or 6.4%, to $10.80. Shares of

Intel

(INTC) - Get Report

gained $1.32, or 5.4%, to $25.74.

Cisco

(CSCO) - Get Report

added 63 cents, or 3.7%, to $17.55.

Charter Communications

(CHTR) - Get Report

was under pressure, losing $1.64, or 11.6%, to $12.50. The company posted a loss of $1.08 a share in the third quarter and lowered its revenue forecast for 2001.

Network Appliance

(NTAP) - Get Report

saw its shares rise $2.31, or 17.4%, to $15.61 after reaffirming previous guidance.

Among sectors, chips were up 6.5%. Internet stocks rose 2.5%. Biotechs, banks and cyclicals were also stronger. About 1.29 billion shares changed hands on the

New York Stock Exchange. The Nasdaq traded about 1.75 billion shares.

European markets were higher, with London's FTSE 100 up 0.6% at 5071 and Germany's Xetra DAX gaining 1.7% at 4636. In Japan, the Nikkei closed down 0.2% to 10,347, while in Hong Kong the Hang Seng gained 0.8% to 10,159.

In Afghanistan, the ruling Taliban said Thursday it had repulsed a coordinated air and ground attack carried out by the U.S. and opposition forces. The claim followed Pentagon confirmation that the U.S. is using B-52 bombers to target troops on the Taliban front line.

Government fixed-income securities were well off their session highs around 4 p.m. EST. The 10-year Treasury note was down 4/32 to 105 31/32, yielding 4.25%. Meanwhile the 30-year bond, which the government plans to stop selling, was gaining 1 1/32 to 108 26/32, yielding 4.81%.