NEW YORK – Stocks rose Wednesday, led by technology shares, as investors were encouraged by lower stock prices from the market's recent selloff and some mildly positive outlooks in the beleaguered sector.
The blue-chip Dow Jones industrial average gained 17.16 points, or 0.18 percent, to end the session at 9730.96, while the technology-packed Nasdaq Composite Index jumped 39.85 points, or 2.12 percent, to 1,922.38. The broader Standard & Poor's 500 Index added 8.87 points, or 0.79 percent, to 1,128.18.
Helping boost optimism were better-than-expected earnings from chip equipment maker Novellus Systems Inc. , which rose more than 9 percent. The ensuing sector rally helped the Nasdaq Composite Index rebound from 2-month lows carved out Tuesday.
"The chip equipment stocks have the biggest bang for your buck and they've been down the most," said David Memmott, head of listed block trading for Morgan Stanley. "In terms of earnings, the major techs are behind us, retailers have done their thing. We're running out of areas for bad news."
News that sales at U.S. chain stores rose in the latest week helped buoy sentiment, as they suggested consumers may yet rescue the struggling economy from the grip of recession.
"It's expectations that the economy will rebound," said Richard Babson, president of Babson-United Investment Advisors, of the catalysts he thought were behind the rise. But sounding a note of caution, he said: "There's still a lot of expectations forward-looking in the market and that, of course, means that expectations can be exceeded or dashed."
Novellus jumped $3.42 to $39.65, after reporting results that beat estimates, even as net income dropped due to weak demand in the battered chip sector.
Novellus was one of five chip equipment stocks upgraded by J.P. Morgan Securities Inc. The upgraded stocks included Applied Materials, up $1.75 at $41.24, and KLA Tencor , up $3.64 at $51.50. The Philadelphia semiconductor index added 4.29 percent.
North American makers of microchip-making equipment saw new orders rise about 7 percent and shipments gain in December, according to Semiconductor Equipment and Materials International. The closely watched ratio of orders to shipments, known as the book-to-bill ratio, was 0.78 in December, an improvement from a ratio of 0.73 in November.
"The semi book-to-bill was better than forecast and that's a space that's been under negative news for the last few quarters," said Robert Cohen, head trader for Credit Suisse First Boston.
Wall Street will be all ears for Federal Reserve chief Alan Greenspan's testimony early Thursday to Congress on the health of the world's largest economy. Mixed signals from Greenspan and other Fed officials lately over the timing and strength of an economic recovery have put many Wall Street players in a quandary over the Fed's next move on interest rates.
"I think the markets are totally confused right now, and that's not something I think was (Greenspan's) intention," said Joel Naroff of Naroff Economic Advisers in Holland, Pennsylvania.
Tyco International Ltd. tumbled $2.45 to $45.10 in heavy trade, as investors dismissed the conglomerate's attempt to ramp up its share price by splitting the company into four separate publicly traded enterprises.
One of the big drags on the Dow was computing giant International Business Machines Corp., off $2.60 at $107.90. IBM added to its hefty losses in the previous session, when Merrill Lynch urged clients to sell pricey technology stocks.
Exxon Mobil Corp. rose 88 cents to $38.90. The oil giant reported a 49 percent drop in quarterly profits, but excluding special items and expenses relating to its 1999 acquisition of Mobil, its earnings were at the high side of analysts' estimates.
Boeing Co. , another Dow stock, lost 30 cents to $39.33 after the world's largest plane maker said net profits fell 79 percent, but met the consensus of analysts' forecasts as reported by First Call.
Coca-Cola Co. , another Dow stock, fell $1.12 to $44.78. Coca-Cola Enterprises Inc., the world's largest bottler of Coca-Cola soft drinks, reported a fourth-quarter loss due in part to weakness in its key North American market and the effect of an accounting change that also sharply reduced 2001 earnings. Coca-Cola Enterprises fell $2.15 to $18.30 -- a drop of 10.5 percent.
Emulex Corp. , a storage equipment maker, surged $5.53 to $44.13, or 14 percent, after reporting operating earnings that exceeded the high end of Wall Street estimates amid higher-than-expected revenue growth. The stock, however, fell after-hours to $42.65 after the company said it plans to raise $300 million by selling debt convertible into company stock.
Mercury Interactive Corp. bolted up more than 22 percent after the software testing and monitoring products and services provider said profits, excluding charges and other items, fell from a year earlier, but exceeded expectations. Shares jumped $6.57 to $35.86 on the Nasdaq.
Dow component DuPont Co. gained 83 cents to $41.27. The No. 1 U.S. chemical company reported a sharp earnings decline, blaming weaker demand and lower prices for its chemicals and plastics. But it still beat Street estimates.
A downbeat note from a key Street strategist briefly reawakened jitters about the outlook for corporate profits. Worries about the profit outlook resurfaced after Goldman Sachs' top strategist Abby Joseph Cohen cut her earnings forecast for the S&P 500 index by a third, citing accounting changes.
Advancing issues led decliners 5 to 4 on the New York Stock Exchange. Volume came to 608.04 million shares, compared with 584.96 million at the same point Tuesday.
The Russell 2000 index rose 8.02 to 477.45.
Overseas, Japan's Nikkei stock average fell 0.1 percent. In Europe, Germany's DAX index gained 2.3 percent, Britain's FT-SE 100 was up 0.6 percent, and France's CAC-40 advanced 0.1 percent.
Reuters and the Associated Press contributed to this report.