Wall Street: Wednesday close

RUMOURS that

The Dow, whipsawed by choppy trading for most of the day, closed ahead 100.45 points or 1.1% at 9617.71. The Nasdaq, which started the day at its lowest since 2 October, spurted 21.85 points or 1.5% to 1519.03.

Analysts said the Microsoft rumour sparked a short squeeze as traders betting on a further market drop bought back borrowed shares. Microsoft shares closed up $2.97 or 5.7% at $55.54.

Other leading techs also found buyers apparently on the theory that if Microsoft was seeing its business strengthen, then the sector might finally be rebounding. Intel jumped $1.36 or 6.7% to $21.58. Rival chipmaker Advanced Micro Devices climbed 34 cents or 3.6% to $9.67.

The late rally overshadowed the early morning arrest on insider trading charges of former pharmaceuticals executive Sam Waksal, who resigned recently as chief executive of ImClone Systems. It was alleged that Waksal waited several days to make public that the Food and Drug Administration had rejected data submitted in support of the approval process for Erbitux, ImClone's much-vaunted anti-cancer drug.

Tips from Waksal led to share sales of $11.5m by two parties connected to the former executive and Waksal had attempted to sell a big block of his own shares, prosecutors alleged.

Waksal, 54, who hosted a Christmas party attended by a host of celebrities including New York Mayor Michael Bloomberg, businesswoman Martha Stewart and pop star Mick Jagger, reportedly passed the information to family members just prior to the public announcement.

ImClone shares, which peaked at $74 in December, tumbled earlier before finishing ahead 28 cents or 3.7% at $7.83. Shares in Martha Stewart Living OmniMedia plunged $2.10 or 12% to $15. Stewart sold 3,000 ImClone shares just before the information was made public, but has denied knowing of the adverse regulatory ruling. Waksal is said to have dated both Stewart and her daughter at different times.

The arrest is the latest in a string of tawdry revelations involving company finances and insider behaviour in the aftermath of Enron's collapse late last year.

Conglomerate Tyco International, which has been in the spotlight for alleged corporate excesses, fell another 90 cents or 8% to $10.15.

Markets had started the day in the black after companies including consumer products giant Procter & Gamble issued upbeat statements. P&G, which makes Pampers nappies, Crest toothpaste and Tide washing powder, lifted its forecasts and its shares rose $3.94 or 4.4% to $92.94.

Mobile telecoms equipment maker Motorola said it could top earnings expectations, helping boost its shares $1.25 or 8.7% to $15.66.

On the other side of the ledger, Monsanto dropped $1.30 or 4.8% to $25.55 after it said slower sales of its Roundup weed killer were hurting its performance.

Electronic business software maker Siebel Systems slumped $2.48 or 14% to $15.18 as it voiced concern over what it called a tough operating environment.