Techs take Wall Street higher

NEW YORK (CNNMoney.com) -- Tech stocks rallied Tuesday lifted by strength in Apple and Yahoo, while the broader market gained after early economic reports encouraged hopes that the Federal Reserve might consider cutting interest rates at its meeting later in the month.

The Dow Jones industrial average (up 37.55 to 13,395.29, Charts) gained 0.3 percent with 3-1/2 hours left in the session.

The broader Standard & Poor's 500 index (up 10.89 to 1,484.88, Charts) was up 0.7 percent, while the tech-heavy Nasdaq composite index (up 28.42 to 2,624.78, Charts) gained 1 percent.

All three major gauges rallied Friday after comments from Federal Reserve Chairman Ben Bernanke eased concerns about interest rates, and comments from President Bush indicated some help for consumers affected by the subprime mortgage crisis. Markets were closed Monday for Labor Day.

Stocks continued to climb after Tuesday morning's economic reports. The Institute of Supply Management's manufacturing index slipped to 52.9 in the latest survey, down from the 53.8 reading for July. Any reading above 50 indicates growth in the sector. Economists surveyed by Briefing.com had forecast the index would slip to 53 in the latest survey.

Meanwhile, July construction activity sank by the biggest amount in six months as spending on homes fell for a record 17th straight month. Tuesday kicked off a big week for economic news, culminating with Friday's August jobs report.

Fred Dickson, chief market analyst at D.A. Davidson & Co., said September on Wall Street was off to a positive start. "The ISM numbers were generally OK," Dickson said. "[The report] showed some growth and that provided a little bit of a lift."

Shares of Dow component Home Depot (down $2.03 to $36.28, Charts, Fortune 500) sank nearly 6 percent after the home improvement retailer said it plans to buy back about 289.6 million shares for $37 each or a total of about $10.7 billion.

Fellow Dow component Merck (down $0.28 to $49.89, Charts, Fortune 500) edged lower despite a report over the weekend that its experimental cholesterol drug Cordaptive can reduce so-called bad cholesterol and increase the levels of "good" cholesterol with minimal, unwanted side effects.

Of the 30 stocks in the Dow, 19 rose and 11 fell.

Ford Motor (Charts, Fortune 500) reported another large drop in sales in August but also announced that it would offer cash incentives too boost car sales, sending shares of the automaker up over 1 percent.

Later in the session, U.S. automakers General Motors (Charts, Fortune 500) and Chrysler Group are forecast to post a steep drop in August auto sales, while sales at Japanese rivals such as Toyota Motor (Charts), Honda Motor (Charts) and Nissan (Charts) are forecast to be higher. The results could again leave domestic brands behind the import brands in U.S. sales, as they were for the first time on record in July.

The Wall Street Journal reported that the Consumer Product Safety Commission is now investigating toymaker Mattel (up $0.28 to $21.91, Charts, Fortune 500) over the timeliness of its disclosures of safety problems with toys imported from China.

The Journal also reported Monday that Sony (up $1.39 to $49.17, Charts) is preparing a major push in the business of video-downloads, a move that would be a challenge to rival Apple (up $4.74 to $143.22, Charts, Fortune 500).

But Apple got a big boost after Piper Jaffray said the iPhone maker could beat its sales goal in the September quarter.

Also helping lift the Nasdaq was Yahoo (Charts, Fortune 500), which jumped 5.5 percent after Bear Stearns named the stock a top pick.

And discount wireless phone service provider MetroPCS Communications (up $1.51 to $28.80, Charts) offered to buy rival Leap Wireless International (up $11.70 to $84.20, Charts) for about $5.12 billion in stock.

Market breadth was positive. On the New York Stock Exchange, winners edged out losers by 2 to 1 on volume of 650 million shares. On the Nasdaq, advancers topped decliners by 3 to 2 on volume of 950 million shares.

Treasury prices fell slightly, raising the yield on the 10-year note to 4.55 percent from 4.53 percent late Friday. The dollar was up against the euro but lower versus the yen in early trading.

Oil prices rose 81 cents to $74.85 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $8.60 to $690.50 an ounce.