Stocks edged higher today in the wake of yesterday's stunning gains. But as the euphoria over the

Federal Reserve's rate cut wears off, some investors are beginning to question the sustainability of the current price levels.

After some hesitation this morning, the

Nasdaq Composite Index climbed 27.24 points, or 1.3%, to 2193.68. The

Dow Jones Industrial Average, which surged past the 11,000 level on Wednesday, finished up 32.66 points, or 0.3%, to 11,248.58. The blue-chip index is now trading only 4% below its record close of 11,722.98, hit on Jan. 14, 2000.

On the heels of recent rallies, some market experts are worried. "Given the economy is still in a bottoming process, it doesn't make sense for the industrials to be just off their all-time high," said Larry Rice, chief investment officer at

Josephthal

, a privately held securities firm in New York.

For Rice, price-to-earnings multiples, which are still high by historical standards, are a concern. "I hope to see some profit-taking soon, because frankly, it's hard to find value in this market right now," said Rice. "The last thing

I want to see now is for this rocket ship to keep going."

Other Wall Street pros were more optimistic about today's action. "In the wake of yesterday's tremendous rally, it's impressive that we're on the upside," said Peter Coolidge, managing director of trading at

Brean Murray Foster Securities

. Trading volume, which tapered off ahead of the Fed meeting, was active for the second day in a row.

As investors responded to the Fed's fifth interest-rate cut this year, stocks soared yesterday in one of the biggest rallies of 2001. For the first time since September 2000, the Dow breached 11,000. As of today's close, it is up 19.8% since its recent low of 9,289.48 on March 22. The blue-chip index is ahead 4.3% for the year. The Nasdaq is up 33.9% since hitting a recent low of 1638.80 on April 4, but it's still down 11.2% for the year.

With the rate cut in the rearview mirror, investors have turned their attention to the latest round of profit reports. While they remain skeptical about the prospects for second-quarter earnings, investors are hanging on to the hope for a recovery in the second half of the year.

The latest earnings results from fiber-optics equipment manufacturer

Ciena

(CIEN) - Get Report

and computer and printer maker

Hewlett-Packard

(HWP)

helped stocks today.

This morning, Ciena reported adjusted income that surpassed analyst estimates. What's more, the networking equipment manufacturer said it is "possible" it will make its earnings and revenue targets for the year. Ciena rose 0.8% to $59.35. The

American Stock Exchange Networking Index

climbed 2.1%.

Shares of Hewlett-Packard jumped 11.7% to $29.87 after the company reported earnings that

topped reduced forecasts but fell 66% from year-ago levels. Investors appeared willing to buy the notion that business won't be getting substantially worse in the near future. The company said it was comfortable with third-quarter earnings estimates, but cautioned that sales could fall short of expectations.

Technology, retail, cyclical and transportation names advanced today. Bank stocks, up 18.2% as of yesterday's close from their recent low on March 22, moved lower.

Citigroup

(C) - Get Report

, which this morning announced it was buying Mexican banking giant

Banacci

, dropped 2.1% to $50.70.

On the economic front, data released this morning showed that

initial jobless claims filed last week declined helped stocks. The number of claims reported fell to 380,000 for the week ended May 12, down from 388,000 the previous week. Economists were forecasting that 395,000 claims would be filed. Wall Street will likely watch jobless claims carefully in coming weeks since they presage the monthly employment report. In April, the unemployment rate climbed to 4.5%, its highest level since October 1998.

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Market Internals

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Most Active Stocks

International

European stocks posted modest gains today. London's

FTSE 100

rose 20.5 points to 5904.5. The Paris

CAC-40

jumped 70 to 5593, while Frankfurt's

Xetra Dax

closed up 16.3 to 6165.

Asian stocks surged overnight, with three-digit gains in Tokyo and Hong Kong. Tokyo's key

Nikkei 225

closed 216.4 higher to 13,910.7. Hong Kong's

Hang Seng

climbed 301.9 to 13,637.9.

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