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Wall Street rallies ahead of Google IPO

/ Source: The Associated Press

Investors shrugged off rising crude futures Wednesday, choosing instead to snap up bargain-priced shares and send the technology-rich Nasdaq composite index up sharply ahead of Google Inc.’s much-anticipated initial public offering of stock.

Global fears about terrorism and the premium they’ve added to oil prices have rattled investors, exacerbating the volatility usually associated with late-summer trading. Analysts remained upbeat about the market’s underlying fundamentals, however, and the lack of selling pressure led some to express optimism that the rally, which has lasted through four sessions, might hold.

“People have a tremendous capacity to adapt,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “No story stays in the news forever. So it’s just possible that the market has now fully discounted higher prices of oil, and is poised to move higher.”

At the close, the Dow Jones industrial average was up 110.32 points, or 1.1 percent, at 10,083.15, closing above the psychologically-significant 10,000 level for first time since Aug. 4. The broader Standard & Poor’s 500-stock index closed up 13.46 points, or 1.2 percent, at 1,095.17, while the Nasdaq composite was up 36.12 points, or 2 percent, at 1,831.37.

Despite the robust performance of tech shares, some analysts questioned the conviction behind the buying. Valuations within the sector, which has been badly bruised, have fallen to attractive levels, but that may not be enough to sustain the rally.

“I wouldn’t take today’s move as a change in sentiment, or any positive sign at all,” said Neil Massa, equity trader at John Hancock Funds. “I think we’re still stuck in this trading range. I think investors are truly worried about third and fourth quarter profits. They were expecting a robust recovery ... and it just doesn’t look like that’s happening.”

Investors have grown increasingly worried about inflation in the face of rising energy prices, and a stream of lowered earnings forecasts for the second half of the year has added to that anxiety.

Oil futures surged higher still on worries about the prospects for Russian oil giant Yukos after a Moscow court issued a negative ruling in its tax case. Crude prices declined briefly on reports that a radical Shiite cleric in Iraq had accepted a peace plan, but then reached for a new record high, trading up 65 cents at $47.40.

Attention was again focused on the Google IPO, which was put off because of delays in the approval of its registration at the Securities and Exchange Commission. The SEC formally approved Google’s $1.86 billion IPO after the market closed.

The world’s most popular search engine forecast its stock to trade between $85 and $95 per share, down from previous expectations that shares would sell for $108 to $135. It also said the total number of shares to be sold will be cut to 19.6 million, down from 25.7 million.

Many analysts were closely watching other search engines to see how they will react when Google emerges as a publicly traded competitor. Yahoo! Inc. was up 14 cents at $28.48. Ask Jeeves Inc. added 75 cents to $26.08.

Applied Materials Inc. was finished up 9 cents at $16.16 after reporting better than expected revenues and earnings that beat Wall Street estimates by a penny. Executives described a climate of healthy chip spending, but the company’s forecast for the next quarter was somewhat disappointing, giving investors a mixed impression.

BellSouth Corp. fell 5 cents to $27.15 after saying a new medical benefits plan for its retirees will dent earnings by 3 to 4 cents a share in the fourth quarter.

Mylan Laboratories Inc. added 22 cents to $15.58 after saying it would appeal a federal court ruling that found the Food and Drug Administration violated no law when it rejected the company’s application for a generic pain patch treatment.

Volume was light. Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange.

Overseas, Japan’s Nikkei stock average finished Wednesday 0.5 percent higher. In Europe, France’s CAC-40 closed up 0.2 percent, Britain’s FTSE 100 declined 0.1 percent and Germany’s DAX index added 0.6 percent.