Blue Chips Lead Stock Rally

The advance came on light pre-holiday trading volume. Thursday's main focus will be the June employment report

Stocks Wednesday finished with impressive gains as analyst upgrades on Microsoft (MSFT ) and Wal-Mart (WMT ) encouraged investors.

Though trading volume was light ahead of the July 4 holiday, Microsoft rose more than 2% after an upgrade by Merrill Lynch to "buy" from "neutral," with a $30 price target. Both Microsoft and Wal-Mart were added to Merrill's "Focus One" list of stocks.

Strength in those marquee names helped the Dow Jones industrial average to finish higher by 101.89 points, or 1.13%, to 9,142.84. The broader Standard & Poor's 500 index gained 11.43 points, or 1.16%, to 993.75.

The tech-heavy Nasdaq composite index was the best performer among the major indexes Wednesday, rising 38.64 points, or 2.36%, to 1,678.77.

Investors will look to economic reports for direction Thursday. June payrolls data should set the tone for the markets over the coming weeks, says MMS International, an economic research outfit. MMS expects a modest improvement in jobs, estimating a 30,000 increase in payrolls as the weakness from weather, war and worry is largely over. However, MMS also sees a slight uptick in the unemployment rate, as recent data don't suggest much relief on that front.

Initial jobless claims are also expected Thursday. MMS sees a rise of 6,000 claims to the 410,000 level, which would put initial claims above the the 400,000 level for the 20th consecutive week.

On Wednesday, investors mulled the May update on factory orders, which was in line with economists' expectations. Orders rose 0.4% in May after a revised 3.0% decline in April. Inventories dipped 0.1%, knocking the inventory/sales ratio down to 1.34 from 1.35.

Investors Thursday will get a mid-year update from medical technology company Boston Scientific (BSX ).

In tech news Wednesday, PeopleSoft (PSFT ) said its second-quarter revenues and profits would beat consensus Wall Street estimates. Analysts had worried that Oracle's (ORCL ) hostile bid would hurt sales. The software maker said earnings per share from recurring operations should be in the range of 13 cents to 14 cents per share, up from 11 cents to 12 cents per share previously expected. Shares in PeopleSoft traded slightly lower Wednesday afternoon.

In other company news, coffee chain Starbucks (SBUX ) said same-store sales rose 10% in June, its best sales gain in seven months. The same-store numbers were better than most analysts had expected. Starbucks stock rose more than 6%.

Baxter International (BAX ) said it would take sharp cuts -- closing of 26 facilities, pink slips for 2,500 employees -- and not meet previous 2003 earnings forecasts because of lower-than-expected growth in its bioscience business.

Treasury Market

Prices of U.S. Treasuries finished higher Wednesday ahead of the June payroll report Thursday. Some modest improvement in labor conditions is generally expected, says economic research group MMS International.

World Markets

European markets finished higher Wednesday. In London, the Financial Times-Stock Exchange 100 added 43 points, or 1.08%, to 4,006.90, led by bank and technology stocks. In Germany, the DAX Index rose 94.49 points, or 3%, to 3,241.04. In France, the CAC 40 gained 66.07 points, or 2.19%, to 3,079.07.

In Asia, major stock indexes ended higher. Japan's Nikkei index finished up 313.75 points, or 3.38%, to 9,592.24, extending its bullish mood from Tuesday, following a better-than-expected "Tankan" report. Hong Kong's Hang Seng index rose 25.50 points, or 0.27%, to 9,602.62.

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