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Market Close: Dow, Nasdaq rally despite looming rate increase

Facing the reality of a certain raise in short-term interest rates later this week, investors responded with a sustained rally Monday as the Dow Jones industrial average moved up 103 points to 10,655.15 while the Nasdaq charged up 46 points to close at 2,599.03.

While most market watchers are expecting the Fed to jack up interest rates by one-quarter of a percent this week, the real concern is whether this will be an isolated adjustment or the first in a series of increases.

"It's a very nice rally and I'll take it. If we can go into this meeting on Wednesday with the market having moved up, that leaves us a little leeway," said Barry Hyman, an analyst for Ehrenkrantz, King & Nussbaum. "This is the most telegraphed rate hike in years, the only unknown is how the stock market is going to react."

Internet stocks didn't have much say in Monday's rally.

Yahoo! Inc. (YHOO), was a notable exception, picking up 9 5/8 to 156 1/2. America Online Inc. (AOL) inched up 15/16 to 103 3/4 while Lycos Inc. (LCOS) and ExciteAtHome Corp. (ATHM) gained 11/16 and 1 1/4 a share, respectively.

Infoseek Corp. (SEEK) trimmed 1/4 to 45 3/16 and Amazon.com Inc. (AMZN) moved up 1/2 to 110 11/16.

International Business Machines Corp. (IBM) fell 9/16 to 122 9/16 after announcing it will slash 1,100 employees from its San Jose, Calif. storage division. Intel Corp. (INTC) added 1 11/16 to 57 and Advanced Micro Devices Inc. (AMD) closed off 1/8 to 17 1/8.

Electronics components distributor Avnet Inc. (AVT) lost 2 5/8 to 45 3/16 after saying it would acquire Marshall Industries (MI), which rocketed up 15 11/6 to 35 13/16.

Lucent Technologies Inc. (LU) rose 2 to 65 11/16 after announcing that it and Cisco Systems Inc. (CSCO) agreed to settle a patent infringement lawsuit. Cisco Systems Inc. (CSCO) tacked on 5/8 to 61 15/16 and 3Com Corp. (COMS) picked up 3/16 to 27 1/4. Ascend Communications Inc. (ASND) closed unchanged at 105 3/8 and Juniper Networks Inc. (JNPR) moved up 1/4 to 99 1/8 after its spectacular debut Friday.

Shares of Avant Corp. (AVNT) tumbled 1 9/16 to 11 7/16 after a downgrade. Microsoft Corp. (MSFT) rose 1 13/16 to 86 3/4 and Oracle Corp. (ORCL) finished up 15/16 to 36 11/16.

Vignette Corporation (VIGN) moved up 3 to 66 1/8 after announcing that Compaq Computer Corp. (CPQ) has deployed Vignette software to build its next generation online business, Compaq.com.

Compaq shares closed unchanged at 22 5/16. Dell Computer Corp. (DELL) muscled up 1/8 to 27 1/16 and Gateway Inc. (GTW) trimmed 3/8 to 60 3/4. Apple Computer Inc. (AAPL) added 3/8 to 42 9/16.

Among widely held telecommunications stocks, AT&T Corp. (T) gained 1/4 to 54 5/8; MCI WorldCom Inc. (WCOM) rose 2 7/8 to 95 1/16 and GTE Corp. (GTE) closed up 1/4 to 70 1/8.