(

Updated from 4:15 p.m. EDT

)

A muddled session gained conviction in its last hour, leaving the major indices with decent gains.

The

Dow gained 38.09, or 0.3%, to 11,182.74 and the

Nasdaq Composite Index zipped up 42.27, or 1.1%, to 4053.28.

The Comp got some support from its performance yesterday, when it broke above the critical resistance level of 4000. The last time the Nasdaq closed above that line was July 25.

The broader

S&P 500 moved up 2.28 to 1508.25, and the small-cap

Russell 2000, after a late run, improved 5.42, or 1.1%, to 523.30.

"Technology

stocks -- semiconductors and fiber optics in particular -- are quietly strong," said Brian Finnerty, head of trading at

C.E. Unterberg Towbin

. Yesterday's steadily rising Comp, he said, "tried to go down, but came back because there were no sellers."

Chip stocks advanced solidly after dipping into the red not long before, with the

Philadelphia Stock Exchange Semiconductor Index

up 0.5%. The semiconductor index, known as the SOX, has been on fire lately -- it was up 21% for the month through yesterday.

"These infrastructure stocks are where it's at," Finnerty said. "You can have all the application service providers in the world; the concept stocks are not it. It's the nuts and bolts" of the Internet that are hot now, he said.

Software maker

VA Linux

(LNUX)

rode high, up 18.5% after last night reporting a narrower-than-expected loss and drawing positive analyst comments today. The company supplies products and services for use with Linux, a free computer operating system.

Red Hat

(RHAT)

and

PeopleSoft

(PSFT)

also got a pop on the news. Red Hat was up 8.5%, while PeopleSoft rose 10.3%. The

Goldman Sachs Technology Index

software sub-index was up 2.3%.

Fellow Nasdaq dweller -- but decidedly nontech issue --

Krispy Kreme

(KREM)

got a sugar rush from a positive earnings report and outlook. The stock powered up 23.6%.

The disaster du jour was telecom equipment company

Next Level Communications

(NXTV)

, which got pummeled 54.4% to 41 3/4 after a downgrade from

Lehman Brothers

.

TheStreet.com

wrote about Next Level's plunge in an earlier

story.

Lehman slashed its rating due to forecasts that broadband communications giant

Qwest's

(Q)

contribution to Next Level's sales would diminish dramatically now that Qwest has bought

U S West

, hurting Next Level's top line. Such an event would remove "the potential for one of the most important sources of significant upside to our revenue projections, which

was the key factor in our investment recommendation," the report said.

'No Guarantee of Safety'

"There is really no guarantee of safety," said Adam Wagner, president of

Wagner Hermann & Herbst

in Houston. "People say I only do blue-chips, but what happened to Next Level can happen to anyone."

Wagner said he favors using direct hedging as a downside protection. As long as he believes in the long-term upside of a stock, he said, he doesn't mind owning it, since hedging -- taking steps, such as buying put options or selling a stock short, to protect against losses -- is a good way to protect against getting whacked in a situation like this one.

TheStreet.com Internet Sector

, the

DOT, jumped 11.27, or 1.4%, to 802.21, following encouraging comments from

Merrill Lynch

Net-meister

Henry Blodget. He pegged

America Online

(AOL)

,

Yahoo!

(YHOO)

and

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

among his recommendations in the consumer sector. Today's

Pulse of the New Economy story looks at Blodget's comments.

The Dow was getting some upside action from a number of its technology components, as well as

Boeing

(BA) - Get Boeing Company Report

, which was up 6.8% despite an announcement by the

National Transportation Safety Board

that a design defect by the company caused the mid-air explosion of TWA Flight 800 four years ago.

Maytag

(MYG)

motored up 9.9% after reports it was in talks to be acquired by

Electrolux

(ELUX)

.

TheStreet.com/NYTimes.com

joint newsroom covered these talks in a

separate story.

Durable Goods No Spark for a Big Rally

This morning's cooler-than-expected July

durable goods orders

report was good news for inflation hawks. Then again, the durable goods number is volatile and will be revised next week, so it is not the stuff of a rally.

Durable goods orders came in at a 12.4% drop vs.

Reuters

expectations of a 6.7% drop and the previous month's 9.7% rise. Minus transportation, the number came in at a 4.8% drop, the largest fall since December 1991. These numbers were much lower than expected, reflecting the effects of Fed tightening and giving more support to those who believe the Fed is done raising interest rates for the year.

The Dow got no any help from

ExxonMobil

(XOM) - Get Exxon Mobil Corporation Report

after

TheStreet Recommends

Morgan Stanley Dean Witter

downgraded a couple of big energy bellwethers this morning. ExxonMobil slashed 9.52 points from the index.

And

J.P. Morgan

downgraded

BP Amoco

(BP) - Get BP p.l.c. Sponsored ADR Report

and

Royal Dutch/Shell Group

(RD)

, saying recent gains fueled by rising oil prices were unsustainable.

TheStreet.com

covered the froth in energy stock prices -- and how it might not last -- in a

story yesterday.

Other strength on the New York Stock Exchange came from transport and financial stocks.

Bausch & Lomb

(BOL)

warned of slower growth in its vision care unit and sees revenues for the remainder of the year flat to down. Bausch & Lomb also announced today that it fired COO and President Carl Sassano and eliminated the position. The stock plummeted 35.9%.

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Market Internals

Breadth was positive for the NYSE and the Comp on moderate volume.

New York Stock Exchange: 1,429 advancers, 1,383 decliners, 837.1 million shares. 67 new 52-week highs, 42 new lows.

Nasdaq Stock Market: 2,200 advancers, 1,772 decliners, 1.519 billion shares. 79 new highs, 81 new lows.

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Most Active Stocks

NYSE Most Actives

Nasdaq Most Actives

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Sector Watch

Biotechs were the big winners today, while energy stocks took a hit.

The

Nasdaq Biotechnology Index

was up 4.8%.

Alexion Pharmaceuticals

(ALXN) - Get Alexion Pharmaceuticals, Inc. Report

gained 11.6%,

Xoma

(XOMA) - Get XOMA Corporation Report

was up 24.4% and

Protein Design Labs

(PDLI) - Get PDL BioPharma, Inc. Report

was higher by 10.6%.

Downgrades in the energy sector from J.P. Morgan and Morgan Stanley Dean Witter hurt components of the

American Stock Exchange Oil & Gas Index

, down 2.8%, and the

Philadelphia Stock Exchange Oil Service Index

, off 1.7%. The

American Stock Exchange Natural Gas Index

was 2.3% lower.

Enron

(ENE)

was its biggest drag.

Transportation stocks were rebounding slightly from yesterday's weakness. The

Dow Jones Transportation Average

edged up 0.8%. The

American Stock Exchange Airline Index

was higher by almost 2%.

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Bonds/Economy

Treasuries were nearly unchanged today, giving back a mild rally built on this morning's durable goods release, which showed durable goods orders fell 12.4% in July. It is the largest decrease on record, according to the

Commerce Department

. A decrease wasn't unexpected, as durable goods orders rose a revised 9.5% in June. But economists were only looking for a 6.7% decline in July, according to the

Reuters

consensus.

The decrease is largely due to a 31.7% decline in transportation orders, largely due to declines in aircraft orders. That reverses last month's whopping 41.7% increase in transportation orders. Excluding transportation orders, durable goods fell 4.8%, after rising 0.5% in June. The durable goods release is a volatile one, subject to wild swings month to month.

The benchmark 10-year Treasury bond was up 1/32 at 100 6/32, its yield at 5.725%.

The Treasury Department conducted another successful buyback today, repurchasing $750 million in long-dated Treasury securities. The average maturity of the securities purchased was 8.6 years; the Treasury received $4.949 billion in interest for the buyback.

The

minutes from the

Federal Reserve's June 27-28 meeting released today around 2 p.m. EDT showed the Fed voted unanimously to leave rates unchanged on Tuesday. The minutes also showed the Fed's stance on monetary policy relaxing a bit. In May, after raising the

fed funds rate 50 basis points, or 0.5%, to 6.50%, the committee was gunning for more hikes.

"Many Committee members noted that, based on the currently available information, additional firming of policy could well be needed at some point in the future, though a number also expressed the opinion that less tightening probably would be required than they had thought at the time of the May meeting," the minutes said.

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International

European markets ended trading sessions on the downside.

The

FTSE 100

fell 9.2 to 6557. Across the channel, the

CAC 40

in Paris dropped 39.77, or 0.6%, to 6461.93. Late in the German session, the

Xetra Dax

was near unchanged at 7227.8.

The euro was lately trading at $0.9023.

Asian markets moved higher overnight, with tech stocks giving Tokyo a boost and financials buoying the market in Hong Kong.

Tokyo shares climbed as a host of long-term investors, including foreign and local fund managers, returned to the market to pick up selected semiconductor and electronic stocks.

Although the long-term economic and financial outlook remains cloudy, traders said the next several weeks bode well for stocks because a host of data should signal strength in certain areas of the economy.

The

Nikkei 225

index rose 234.17, or 1.4%, to close at 16,670.82.

The greenback barely budged against the yen and fetched 107.05 in Tokyo trading. The greenback was lately trading at 106.86 yen.

Hong Kong's

Hang Seng

index clung to earlier gains, rising 12.30 to close at 17,439.70, largely on the back of a rally in bank shares.

HSBC

(HBC)

jumped HK$1.50, or 1.3%, to 114.50 ($14.68), while

Dao Heng Bank

rose 1.00, or 2.6%, to 39.90.

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