(Updated from 10:06 a.m. EDT)

Investors were adding to yesterday's late-day rally in the face of Nokia's ( NOK - Get Report) weak outlook. Wall Street was processing cheese (in the form of the Kraft Foods ( KFT) IPO), a credit downgrade on Lucent ( LU) and digesting slightly weaker-than-expected retail-sales figures.

The Nasdaq Composite Index was lately up 3.5 points to 2173, while the Dow Jones Industrial Average was lately up by about 5.3 points to 10,953. The S&P 500 was up 1.4 points to 1254.

Some Wall Street watchers said they thought the market would build on Tuesday's late-stage rally that happened despite Nokia's warning. Yesterday, the market plunged at the open after the Finnish mobile-phone maker issued a profit warning. But stocks came back in afternoon trading in what was seen by some market pros as a short-covering bounce. A short-covering bounce is when investors buy back stock sold short and signals momentum-driven, rather than news-driven, action.

"I am very impressed with the way the market has performed in the face of warnings, and I think it will continue to be able to do that," said Ray Hawkins, vice president of block trading at J.P. Morgan. "I don't expect any robust gains -- not 100 point gains -- but it will trend to the upside today."

Retail sales data for May released this morning showed continued slowing in the economy. Overall, retail sales rose 0.1% for the month, just a tick below consensus forecasts for a 0.2% rise. Retail sales had risen 1.1% in April. Excluding automobiles, retail sales in May rose 0.3%. Economists had been forecasting 0.4% growth. Excluding automobiles, retail sales rose 0.8% in April. The retail sales number measures total sales at retail businesses and helps to gauge personal consumption trends.

"Most of the attention today is going to be focused on this Kraft deal," Hawkins said. "But I can't believe the stock is going to do a whole lot of anything -- this is a foods company," he said. Still, the IPO has been well-received by investors. So far, Kraft was trading up 2.2% to $31.68.

Shares of Kraft Foods start trading on the New York Stock Exchange today after the company's initial public offering of 280 million shares priced at $31 each last night -- the high end of an upwardly revised range. That nets $8.7 billion for the food company, making it the second-largest IPO in U.S. history, behind last year's offering of AT&T Wireless. Kraft's parent company, Philip Morris ( MO), sold about 16% of its stake to the public but will retain an 84% interest in Kraft. So far this morning, Philip Morris was lately down 0.6% to $48.29.

Elsewhere, Lucent was off 6.3% to $7.44 in early trading, after news last night that Standard & Poor's lowered its rating on the company's bonds to junk status.

Microtest ( MTST) was surging this morning, up some 91% to $8.02 after word came out that it is being acquired by tool and component maker Danaher ( DHR). Microtest develops products that facilitate the management of computer networks. Danaher was up 0.9% to $64.66 so far today.

Extreme Networks ( EXTR) said Tuesday that it will meet fourth-quarter financial expectations, as corporate orders and gross margins have rebounded from last quarter's plunge. Its shares surged. The news could be good for Extreme's rivals, too, as it suggests that information technology spending is starting to firm after a long, sharp decline. Extreme was lately up 1.4% to $32.73.

Drugmaker Eli Lilly ( LLY) also reaffirmed its performance guidance for the second quarter this morning, but said that the Federal Drug Administration had extended its own deadline for reviewing the company's sepsis drug filing. Lilly was falling 3.1% to $83.86 this morning.

Not everyone was so confident about their financial performance. Internet incubator CMGI ( CMGI)reported a third-quarter loss that more than doubled to nearly $1 billion. Avaya ( AV), the communications-equipment maker spun off from Lucent Technologies, lowered its fiscal 2001 revenue outlook. And Loudcloud ( LDCL), an Internet infrastructure services provider, missed analysts' expectations for the fiscal first quarter, posting a loss of $60.3 million, or $1.25 a share. CMGI was lately down 13% to $3.60; Avaya was off 8.2% to $13.77; and Loudcloud was off 19.2% to $2.73.

Over the past week, the market has contended with profit warnings from a wide swath of corporate America. Investors, who sent stocks up significantly from late March through early May based on hopes of an economic recovery are now worried a second-half turnaround is increasingly unlikely.

Asian markets ticked slightly lower overnight, but European markets were posting moderate gains in early trading, encouraged by the bounce in Nokia this morning. Nokia was rising 2.6% to $23.86 this morning, despite its warning and a slew of reactive negative notes on the company this morning from Credit Suisse First Boston, Goldman Sachs, Salomon Smith Barney and UBS Warburg.