The Dow gained 114.30 points to close at 11,175.80. The Nasdaq was also higher, gaining 77.73 points to close at 2,233.66. Trading was relatively light, and the Nasdaq experienced a temporary outage.
The Nasdaq SelectNet stock trading system was down for about 20 minutes at the start of the day. The outage came as the Nasdaq was working to increase capacity.
U.S. productivity saw its steepest fall since 1983, according to a government report issued Tuesday. According to the Labor Department, productivity of nonfarm workers fell at an annual rate of 1.2 percent during the first three months of the year, much weaker than previous estimates of a 0.1 percent decline.
While the slump in productivity argues for further aggressive cuts in interest rates to foster economic growth, the potential for inflation implied by rising labor costs initially left investors cautious. The Federal Reserve will meet at the end of the month to set interest rates.
Amazon still expects to report a pro forma profit in the fourth quarter, CEO Jeff Bezos said at Amazon's analysts meeting today. Bezos added that he sees the company being profitable for the entire year in 2002, on a pro forma basis that excludes a range of costs, such as interest on Amazon's more than $2 billion in debt and charges associated with acquisitions.
Amazon also plans to add a personal computer store and a business bookstore by the end of the year as part of its effort to reach profitability. The company has been criticized in the past for expanding too fast. Amazon was down 47 cents to $16.44.
Yahoo rose 22 cents to $20, despite news that Wit SoundView is reducing estimates for the company. That reduction comes just a day after another analyst upgraded the stock based on talks with the company's advertising partners.
Xilinx, which makes specialty semiconductors, said it is maintaining sales targets for its fourth quarter, adding that order cancellations are slowing. The company posted a midquarter update on its Web site after the market closed Monday and saw its stock jump $4.02 to $45.61 Tuesday. That news is a change from most reports that analysts have been getting from chipmakers, several of which have issued warnings for the current quarter.
The CNET semiconductor index was up almost 6 percent as Xilinx's news boosted other chip stocks. Altera was up $2.44 to $27.25, Atmel rose 27 cents to $11.88, and Cypress Semiconductor gained $1.23 to $23.10.
Comverse, which makes telecommunications software, topped estimates for the first quarter, posting net income of $79 million, or 43 cents a share, compared with the $56 million, or 32 cents a share, it earned in the year-ago quarter. Comverse was up $8.86 to $67.52.
In other telecommunications news, Lucent executives told analysts Tuesday that the equipment maker's third-quarter results should be in line with Wall Street expectations if the company maintains its current sales pace. Briefing analysts at the SuperComm show in Atlanta, CEO Henry Schacht said business in the company's June quarter will improve from the preceding quarter. Lucent was up 49 cents to $8.49.
Other telecom equipment stocks also gained. The CNET telecom equipment index gained almost 3 percent.
Among leading volume movers, Microsoft gained $1.82 to $72.60, Intel was up $1.23 cents to $29.73 and Oracle rose 70 cents to $16.76.
Staff and Reuters contributed to this report.