Blue-chip stocks ended above the key 10,000 mark for the first time in three days, but broader stock indexes fell after a rocky trading session.

Stocks were aided by Microsoft Corp., which reaffirmed its fiscal-year outlook, but persistent worries about weak corporate earnings dogged the market. Merrill Lynch cut its rating on cellular phone maker Motorola Inc. and French telecommunications equipment maker Alcatel said it will be a challenge to meet current earnings forecasts.

The Dow Jones industrial average rose 35.78 points to end at 10,033.27 — its first close above 10,000 after three sessions when it ended below the magic five-digit mark.

The Nasdaq Composite Index fell 11.77 points to close at 1,759.01, the sixth down day in seven. The benchmark Standard & Poor's 500 index slipped 1.20 points lower to 1,131.74.

"You don't have anything out there that is a compelling reason for anybody to be buying stocks right now," said Ned Collins, a trader at Daiwa Securities America. "Even though there are some stocks out there that are trading at $10 that were $80 a year ago, if they are still selling at 40 times earnings, then they are still pretty expensive."

Microsoft's Chief Financial Officer John Connors repeated the company's financial guidance for the current fiscal-year 2002, and the company said it still expects a boost from its new Windows XP operating system in the fall.

Connors, speaking to investors at an SG Cowen Technology Conference in Boston, said the company's expectations remain as they were in mid-July, when Microsoft reported fourth-quarter 2001 results. Microsoft shares rose $1.64 to $57.74.

The market briefly bounced at the news. But Wall Street, burned in past months after trying to predict the market's bottom, hesitated to make big bets ahead of a period that may bring another downpour of profit warnings. September has tended to be the worst month for the stock market in the last 50 years.

"There is still the fear that maybe the worst isn't behind us," said Uri Landesman, chief investment officer with AFA Management Partners LP, which oversees $250 million. "That's the big battle -- have we seen the worst or have we not seen the worst? That is what is really buffeting the market. It's a skittish market. There's not a lot of conviction."

Motorola dropped $1.09 to $16.40 after Wall Street house Merrill Lynch cut its investment rating on the wireless technology giant to "neutral" from "accumulate," citing "prolonged" weakness in the company's major markets.

Merrill also ratcheted down its rating on cellular phone equipment maker Ericsson, which said on Tuesday it sees no clear signs of a recovery in the market next year. Shares edged up 6 cents to $4.07.

Alcatel's New York Stock Exchange traded shares sank $1.08 to $13.62, after hitting an all-time low of $13.13 earlier. The company is aiming for an operating profit this year, but it will be a challenge in current market conditions, the company's head said. The remarks appeared more cautious than comments made in late July, when the company predicted a positive operating result in 2001.

Technology shares extended losses from Tuesday, when Wall Street gave the thumbs down to Hewlett-Packard Co.'s proposed $20 billion takeover of rival Compaq Computer Corp. 

Compaq, the Big Board's most-active stock, dropped 67 cents to $10.41. Dow component Hewlett-Packard, the Big Board's second most-active stock, lost 66 cents to $18.21. Both stocks hit new 52-week lows during the session after suffering losses a day ago when news of the merger broke.

"The market didn't react well to the Hewlett-Packard news and that, along with pessimism about the outlook for third-quarter earnings, is not enabling anything to go up right here," said Stephen Carl, head of domestic equity trading For Williams Capital. "When third-quarter earnings come out, we're not sure how positive they're going to be."

Other telecommunications stocks slumped, including Ericsson, which dropped 12 cents to $3.86. Merrill also cut its rating on the cellular phone equipment maker, which said on Tuesday it sees no clear signs of a recovery in the market next year. 

In other news, Hudson River Bancorp Inc. dropped $1.05 to $19.80 after saying it was buying Ambanc Holding Co. Inc. for about $100 million, making it the largest locally based financial firm in the Albany area. Ambanc rose 76 cents to $21.16. 

ATS Medical Inc., a maker of mechanical heart valves, dropped $1.96 to $7.94 after saying it will report a $1 million third-quarter charge that will result in a loss vs. a profit a year earlier. It added that it will launch clinical trials designed to disprove attacks on its products by a rival manufacturer. 

Declining issues led advancers more than 3 to 2 on the New York Stock Exchange. Volume came to 1.34 billion shares, compared with 1.18 billion Tuesday. 

The Russell 2000 index dropped 4.45 at 462.27.

Tokyo stocks took a step back on Wednesday, with sentiment chilled by the failure of the U.S. Nasdaq market to rally on the merger of two U.S. computer giants, indicating investors still have little confidence in a recovery for the U.S. or Japanese economies. 

The Japanese benchmark Nikkei average lost 1.61 percent to 10,598.79. 

European bourses slumped to fresh October 1999 lows. In Europe, Germany's DAX index dropped 2.9 percent, Britain's FT-SE 100 lost 1.2 percent, and France's CAC-40 slipped 2.2 percent.

Reuters and the Associated Press contributed to this report.