News that a federal appeals court has overturned a ruling that software giant Microsoft must be broken up has sent share prices higher.

The Dow Jones industrial average closed 131 points higher at 10,566. Microsoft is one of 30 companies which make up the Dow Jones index.

The tech-dominated Nasdaq composite - on which Microsoft is listed - was 51 points higher at 2,125.

Owen Fitzpatrick, co-head of US large-cap equities at Bankers Trust Private Banking said the ruling was "definitely a positive".

He said it was not a huge surprise but would help technology stocks in general.

"It eliminates the possibility of interference on behalf of the government, and lessens the likelihood the government steps in in relation to technology companies and anti-competitive behaviour."

Expected of Bush

Debra McNeill, manager of Fremont Structured Core Fund, a $100m fund containing Microsoft said: "I'm not surprised. I think that this was totally expected after [George W] Bush was elected [president].

"Bush is not supporting the Justice Department in this case. It doesn't mean they did not do anything wrong. It does mean they are not going to be split up.

"I'm just hoping that they tread a little more lightly with their competitors going forward."

Negatives for software firms

Peter Blatchford, head of proprietary trading at Miller Tabak & Co, said the consequences remained unclear.

"The Nasdaq futures rallied significantly on the initial announcement. I think... after the initial euphoria there could be some negatives for the peripheral software companies.

"You have to take a close look at the ruling. It's going back to the courts so we really don't know what it all means yet... Just totally averting the break-up would be bad for the competitors."

Trading in Microsoft shares on the Nasdaq was halted after the court's decision before resuming at about 1850 GMT.

The shares closed at $72.71, up 2.21% after heavy late trading.