Wall Street report: Tuesday close

NEWS that the United States had shifted to a heightened state of alert against terrorist attacks could not prevent markets extending their winning streak to a third day. Shares lost some of their early gains and trading slowed when it was confirmed that the Bush Administration had raised the level of preparedness to 'orange,' indicating a 'high' state of alert and just one notch below the highest warning level.

But buyers returned in afternoon trading to push the Dow Jones Industrial Average higher by 83.23 points or 1% to 8602.61. The Nasdaq rose 15.49 points or 1.2% to 1320.09.

Analysts said news of the terror warning, which raised the level of alertness to its highest since March, caused investors to draw back momentarily. 'There wasn't a flurry of selling, so much as a cancelling of buy orders,' said one market watcher. 'Volume tailed off and people sort of backed away from making a commitment one way or another.'

But fear was apparently overpowered by greed as a counter-balancing force, the so-called 'July 5th. effect,' kicked in. Investors who sold prior to the Independence Day holiday were caught short when the Dow rallied 325 points the day after. A similar relief rally could occur if no terror attacks occur over the next couple of days, analysts said.

Oil and defence-related sectors were among the strongest. ExxonMobil rose 79 cents or 2.3% to $34.79. United Technologies, a major defence contractor, and a component of the Dow Industrials surged $2.08 or 3.5% to $61.21.

Techs were mixed with positive brokers comments boosting the chip equipment sector. Applied Materials gained 78 cents or 6.2% to $13.47. Advanced Micro Devices added 30 cents or 4% to $8.27. Intel forged ahead 39 cents or 2.4% to $16.47. Internet portal Yahoo! was helped by some upbeat broker comments and its shares tacked on 31 cents or 3% to $10.46. Hewlett-Packard rose 66 cents or 5% to $14.16 as it continued to bounce back from recent lows.

A normally negative development had the opposite effect on shares in Martha Stewart Living, which surged $1.30 or 17% to $9.05 after a Congressional committee referred an inquiry into the share trading of the company's founder and CEO to the Justice Department for investigation. The committee had been looking into suggestions Stewart, a US TV media personality, had used inside information in selling shares in drug company ImClone prior to the release of adverse news.

Financial services, dogged by recent adverse publciity, remained under pressure with JP MorganChase falling 44 cents or 2% to $23.15. Citigroup was off a fraction at $30.87.

Among Dow Industrial components, Alcoa was higher by 46 cents or 2% to $23.76, Wal-Mart had gained $1.50 or 2.8% to $54.78 and Alcoa was ahead 46 cents or 2% to $23.76.