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MARKET CLOSE: Calm CPI figures spark blue-chip rally

Inflation jitters were momentarily brushed aside Tuesday after the Consumer Price Index for September rose only 0.4 percent as most analysts had expected. After surging up more than 200 points, the Dow closed up 89 points to 10,204.93 while the Nasdaq trimmed 1 point to end at 2,688.25.

After a higher-than-expected Producer Price Index report, investors were relieved when the CPI, a measure of inflation, rose 0.4 percent as expected. The so-called ``core'' CPI, which excludes food and energy prices, rose 0.3 percent, also matching expectations of economists polled by Reuters.

"Maybe the sky isn't falling. Maybe we overdid it last week," said William Cheney, the chief economist for John Hancock Funds. "And while we were all getting nervous, we were getting good earnings."

Internet stocks benefited the most from the benign CPI numbers as Yahoo! Inc. (YHOO) shot up 4 9/16 to 174 15/16 and America Online Inc. (AOL) tacked on 3 3/4 to 113 7/8. Excite@Home Corp. (ATHM) moved up 2 1/16 to 40 5/8 while Inc. (AMZN) and Lycos Inc. (LCOS) rose 2 9/16 and 3/4 a share, respectively.

Compuware Corp. (Nasdaq: CPWR) closed up 5 1/4 to 29 3/4 after the company rolled past analysts' estimates in its second quarter Monday, earning $108.8 million, or 28 cents a share, on sales of $568.1 million.

Microsoft Corp. (MSFT) fell 1 9/16 to 86 5/16 ahead of its quarterly earnings report. Oracle Corp. (ORCL) trimmed 1/16 to 43 13/16 and Sun Microsystems Inc. (SUNW) gained 1/2 to close at 94 1/16.

Texas Instruments (NYSE: TXN) lost 5 3/16 to 79 1/4 after it posted third-quarter earnings of 51 cents a share, 143 percent increase over last year's quarter, and a healthy 8 cents ahead of First Call's expectation of 43 cents a share. The company said semiconductor revenue, up 26 percent to $1.92 billion, offset the loss of revenue from its divested memory business.

Clarify shares took off Tuesday after Nortel Networks (NYSE: NT) said it will issue more than $2 billion in stock to buy the company. Clarify (Nasdaq: CLFY) closed up 16 3/4 to 62 1/16 while Nortel fell 2 3/16 to 50 3/16.

Cisco Systems Inc. (CSCO) closed unchanged at 67 3/8 while 3Com Corp. (COMS) and Lucent Technologies Inc. (LU) closed off 5/16 and 1 3/16 a share, respectively.

Dell Computer Corp. (Nasdaq: DELL) tumbled 2 3/4 to 38 9/16 after warning Monday that its third-quarter earnings will be lower than expected due to rising memory chip prices.

The rest of the PC sector caught Dell's cold as Compaq Computer Corp. (CPQ) fell 7/16 to 20 while Apple Computer Inc. (AAPL) and Gateway Inc. (GTW) lost 4 3/4 and 4 11/16 a share, respectively.

Intel Corp. (INTC) shed 4 1/4 to 65 1/8. Advanced Micro Devices Inc. (AMD) slid 3/4 to 16 1/2 and International Business Machines Corp. (IBM) lopped off 7/16 to 106 9/16.