updated 5/12/2004 10:19:10 AM ET 2004-05-12T14:19:10

A surge in technology shares led a moderate rally on Wall Street Tuesday as investors sought bargains, picking up interest rate-sensitive stocks that may have been oversold in the market’s latest downturn.

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Investors bought tech shares, small-cap stocks and financial companies despite the fact they were the most vulnerable to the impact of a potential rate hike, which could come at the next Federal Reserve meeting in June. Interest rate fears sent the three major indexes into a 3 percent plunge during the previous three sessions.

Analysts said the unusual buying choices represented bargain hunting by some investors, but noted that volume was much lighter than during the three-day sell-off.

“Right now, you’re seeing the markets pause a bit. I think we’re re-evaluating the sell-off to see if it’s been an overreaction to the interest rates,” said Stephen Sachs, director of trading for Rydex Investments. “We definitely have room to go down more, but near-term, say this week, we’re at some very near-term support.”

The tech-concentrated Nasdaq composite index finished Tuesday up 35.28 points, or 1.9 percent, at 1,931.35 after dipping below the 1,900 mark at Monday’s close.

The Dow Jones industrial average closed above 10,000, one day after slipping below that mark for the first time since December. The Dow gained 29.45 points, or 0.3 percent, and closed at 10,019.47. The broader Standard & Poor’s 500-stock index rose 8.33 points, or 0.8 percent, to 1,095.45.

Buying was spread nearly across the board, with only healthcare and other defensive stocks suffering as investors took the chance on higher risk stocks — at least for the time being. Analysts did not believe Tuesday’s rally was indicative of momentum in the markets, however, noting that rate fears remained among many investors.

“This is a period of extreme uncertainty. We’re going to bounce around a lot between optimism and pessimism until the Fed’s next meeting in June,” said Brian Bruce, director of global investments at PanAgora Asset Management Inc.

“Earnings have been fabulous. If you focus on that, things are attractively priced. If you’re concerned about rates and the uncertainty there, then the market trades down because the uncertainty means more risk,” Bruce said.

Bruce also noted that there was no real economic data or major earnings reports to focus on Tuesday, leaving investors without any clear signals on the direction of the market. A key inflation indicator, the Consumer Price Index, was expected out Friday.

May Department Stores Co., operator of Lord & Taylor, Filene’s, Hecht’s and Foley’s stores, lost 86 cents to $27.92 after missing Wall Street estimates by a penny. The company posted earnings of $76 million.

A lawsuit settlement helped Mylan Laboratories Inc. meet Wall Street estimates for its first quarter earnings. The company reiterated its yearly outlook, but said it hinged on Food and Drug Administration approval of its latest generic painkiller. Mylan rose 67 cents to $22.59.

Church & Dwight Co., maker of Arm & Hammer household products, fell 20 cents to $44.60 despite posting a 43 percent jump in first quarter profits due to strong sales of cleaning products.

Weak revenues at MCI prompted the embattled telecommunications company to announce 7,500 job cuts late Monday. The company, which posted a loss of $1.19 per share, is currently traded over the counter, but hopes to list on the Nasdaq Stock Market in the coming weeks.

After Tuesday's close, Cisco Systems posted higher quarterly profit and sales citing rising demand among corporate customers for its networking gear.

Advancing issues outnumbered decliners by a 3-to-1 margin on the New York Stock Exchange, where volume was moderate. The Russell 2000 index of smaller companies was up 10.81 points, or 2 percent, at 548.67 by the close.

Overseas, Japan’s Nikkei average added 0.2 percent. Britain’s FTSE 100 closed up 1.4 percent, France’s CAC-40 rose 1.5 percent for the session and Germany’s DAX index gained 1.7 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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