The Dow Jones industrial average rose 17.09 points, or 0.18%, to 9,730.89. The Nasdaq Composite index added 39.80 points, or 2.11%, to 1,922.33. The broader Standard & Poor's 500 index climbed 8.87 points, or 0.79%, to 1,128.18.
The main factor driving stocks continues to be earnings reports, and investors are looking for signs that a recovery in corporate profits is underway. Among stocks set to report their quarterly results on Thursday are EMC (EMC
), Bristol-Myers Squibb (BMY
) and JDS Uniphase (JDSU
Still, the major indexes are trading below 50- and 200-day moving averages, which could temper the stock market on Thursday, says Michael Wallace, a market analyst at Standard & Poor's MMS.
On Thursday, the market will also focus on Federal Reserve chairman Alan Greenspan's testimony to the Senate. If Greenspan injects too much optimism into his speech -- after remarks on Jan. 11 that were widely intepreted as downbeat -- then he runs the risk of boosting stocks and driving down Treasuries. That outcome could undermine the Fed's ability to lower interest rates again when its policy-setting arm meets on Jan. 30.
"We expect a balanced tone [in Greenspan's testimony] ... maybe more focus on the implications of deficit spending," Wallace says. He adds that MMS expects the Fed to leave rates undchaged next week.
Investors aggressively bought technology stocks after Novellus Systems (NVLS
) said orders will be better than expected in the current quarter as chipmakers ask for quicker delivery of new equipment.
Other semiconductor stocks moved higher as well. Applied Micro Circuits (AMCC
) posted a third-quarter loss on a 72% revenue decline, saying end markets remain sluggish as customers continue to work through excess inventory. Altera (ALTR
) reported a fourth-quarter profit in line with estimates, while revenue dropped a bit below expectations. The reports prompted JP Morgan to upgrade the semiconductor equipment sector to long-term buy from market perform, despite concerns that shares in the group are still overvalued.
Sectorwise, application software makers and networkers also performed well on the day.
Blue chips made moderate gains, led by Wal-Mart (WMT
), Alcoa (AA
) and 3M (MMM
Exxon-Mobil XOM reported a 49% drop in fourth-quarter profit as the recession put the brakes on petroleum demand and sent energy prices tumbling from their year-ago highs. Shares of Exxon climbed as climbed as the price of crude oil rose for a third day.
The industrials were able to shake off a report from Goldman Sachs' chief strategist Abby Joseph Cohen, who cut her earnings forecast for the S&P 500 -- adding to concerns about the outlook for corporate profits. Cohen cut her forecast by a third, citing accounting changes. She now sees the S&P 500's operating earnings per share at $42 this year, down from a prior estimate of $52.
Meanwhile, Tyco International (TYC
) fell after credit-rating agency Fitch said it may change its rating on the manufacturing conglomerate. On Tuesday Tyco announced it would split into four publicly traded companies.
Treasuries slipped after mediocre results from a record $25 billion two-year auction. Also, the stock rebound and anticipation for an upbeat speech from Greenspan on Thursday pushed two-year notes down.
The weakness in the market came as much from government projections of a steep drop in the budget surplus and a return to deficits -- and new signs of cooperation between President Bush and Senate Majority Leader Daschle on the stimulus plan -- as from traders' anticipation of Greenspan's remarks, according to S&P's Wallace.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index added 31.40 points, or 0.61%, to 5,180.80 on a report that British manufacturers' confidence rose in the fourth quarter. In France, the Paris CAC 40 was higher by 4.09 points, or 0.09%, to 4,450.81. Germany's DAX index rose 117.31 points, or 2.32%, to 5,163.03.
Asian markets ended down on Wednesday. Japan's Nikkei dropped 10.07 points, or 0.10% to 10,040.91 after plunging 229 points on Tuesday, led led by exporters and banks. Hong Kong's Hang Seng index fell 35.55 points, or 0.33%, to 10,762.14, following a 203-point drop on Tuesday. By Suzanne Robitaille in New York