Stocks rose as the Fed dropped interest rates to the lowest level in nearly 40 years, a widely expected move that extends to nine cuts since early January the Fed's campaign to strengthen the wheezing US economy.

"I think that it's going to be a positive for the markets," said Paul Cherney, a market analyst at S&P Marketscope. The central bank cut interest rates by a half-percentage point for the second time in three weeks following the atrocities in the US. The latest reduction brings the federal funds overnight lending rate to 2.5 per cent, its lowest level since 1962 during the Kennedy administration.

Technology shares were little changed despite a warning by Compaq Computer that the weakening economy would push the computer maker into a quarterly loss. Compaq's forecast highlighted Corporate America's sliding earnings, which are expected to tumble more than 20 per cent in the third quarter, making it the worst quarter in a decade.

Compaq slipped 17 cents to $8.16, ranking as the most active on the New York Stock Exchange.