MARKET CLOSE: Mergers, optimism spark rally

Technology and blue-chip stocks showed surprising strength Monday as the Nasdaq composite moved up 28 points to close at 4,071.10. The Dow Jones industrial average added 60 points to finish at 11,252.84.

"What's happening is that the overall interest-rate environment is improving," said Byron Wien, U.S. investment strategist at Morgan Stanley Dean Witter. "The Fed is not going to tighten until after the (November presidential) election -- if then,'' and "probably not even then.

"Inflation numbers are good and the economy seems to be slowing, so the overall interest-rate background is improving and that's helping financials," he said.

Intel (INTC) shares moved up 7/8 to 73 13/16. Advanced Micro Devices (AMD) trimmed 1/8 to 34 3/8 and IBM (IBM) closed up 1 9/16 to 130 9/16 after Credit Suisse First Boston raised its 12-month price target on the stock to $150 from $125 a share.

Yahoo! Inc, (Nasdaq: YHOO) fell 12 3/16 to 122 1/16 after a Lehman Brothers analyst issued a cautious note on the Internet firm.

America Online (AOL) closed off 1 1/8 to 58 7/8 while eBay (EBAY) and Lycos (LCOS) moved up 3/4 and 1 5/8 a share, respectively. Amazon.com (AMZN) clipped 13/16 to 39 1/8.

Among widely held PC stocks, Dell (DELL) gained 7/8 to 39 1/2; Compaq (CPQ) moved up 7/16 to 34 5/16; Apple Computer (AAPL) rose 1 1/4 to 58 1/16 and Gateway (GTW) ended up 23/64 to 66 35/64.

Applied Micro Circuits Corp. (Nasdaq: AMCC) dropped 4 3/4 to 183 13/16 after announcing it will acquire MMC Networks (Nasdaq: MMCN), up 31 3/4 to 110, in a deal worth $4.5 billion.

Web switch developer Alteon WebSystems Inc. (Nasdaq: ATON) lost 1 5/8 to 146 1/8 after it agreed to acquire Bluetail AB, a Swedish Internet startup for about $152 million in stock.

Manugistics Group, Inc. (Nasdaq: MANU) gained 18 to 80 on news of a contract with John Deere (NYSE: DE), which will use the company's e-business software.

Microsoft (MSFT) shares closed up 11/16 to 71 5/16 while Oracle (ORCL) and Sun Microsystems (SUNW) ended up 2 1/8 and 3 1/16 a share, respectively.

VoiceStream Wireless Corp.(Nasdaq: VSTR) shaved off 1 1/8 to 117 1/16 after it announcing it would buy Powertel Inc. (Nasdaq: PTEL), down 5 9/16 to 81 1/16, in a deal to expand its all digital GSM wireless coverage in the Southeastern United States.