NEW YORK – Stocks rose Wednesday, ending at new highs for the year, as investors resumed buying amid bullish brokerage calls and better-than-expected August sales at Cisco Systems (CSCO).
The Nasdaq notched a new 17-month high, topping its performance in the previous session. The blue-chip Dow and broader Standard & Poor's 500 index both hit new 14-month highs.
The Dow Jones industrial average (search) rose 45.19 points, or 0.47 percent, to 9,568.46. The broader Standard & Poor's 500 Index (search) was up 4.28 points, or 0.42 percent, at 1,026.27. The technology-laced Nasdaq Composite Index (search) climbed 11.42 points, or 0.62 percent, at 1,852.90.
The Nasdaq closed at its highest level since April 1, 2002, and the S&P 500 hit its highest close since June 18, 2002. The Dow hit its highest close since June 19, 2002.
"I think people are back from vacation and we're seeing demand across all sectors," said Evan Olsen, head of equity trading at Stephens Inc. "The Nasdaq is stronger on a relative basis but we had a pretty good move on the Dow yesterday so I think overall it's pretty broad-based."
Investors see Cisco, the world's largest maker of equipment that directs Internet traffic, as a benchmark for corporate and government spending because most of the company's sales comes from those customers.
Wednesday's comment by Cisco chief executive John Chambers that August sales were a little bit above his expectations was the major thing lifting the markets, said Ozan Akcin, chief market strategist, Puglisi and Co. "I think that's really carrying optimism right now. I think it's an indication that tech spending is coming back."
The S&P was up for its seventh session in a row and the Nasdaq for its sixth. The Dow had its fourth up session. But stocks backed off earlier intra-day highs as some investors locked in gains after a strong start to a month that is traditionally tough for the market.
"I kind of think the late pullback is nothing more than just some profit taking," said Peter Cardillo, chief strategist at Global Partners Securities Inc. "This market has been up strongly over the last couple of days and it started September off on a good note for the stock market and I kind of suspect that everyone is scratching their heads and saying, 'What's going on here? September is usually weak."'
Cisco shares rose 65 cents, or 3.3 percent, to $20.24 and were the most actively traded on the Nasdaq.
Other technology stocks, including business software firms like Siebel Systems (SEBL) and Mercury Interactive (MERQ), rose sharply, propping up the S&P application software index , which was up 3.7 percent. Shares of Siebel rose 50 cents, or 4.8 percent, to $11.01. Mercury Interactive was up $2.18, or 4.8 percent, to $48.05.
Brokerage CSFB raised its price target on a few application software companies including Intuit Inc. on Wednesday. The move follows Goldman Sachs' upgrade of the software sector to "attractive" from "neutral," which propelled the Nasdaq to a 17-month closing high on Tuesday.
"That whole sector's got an overweight rating that's helping propel Nasdaq higher," said Todd Clark, head of listed trading at Wells Fargo Securities, referring to a CSFB upgrade on Wednesday. "Plus we broke out of the trading range on the S&P yesterday so that's brought some momentum players back into the market."
Shares in Intuit were up $1.13, or 2.4 percent, to $47.84.
General Electric Co. (GE) got a boost Wednesday from brokerage JP Morgan, which raised its rating on the stock to "neutral" from "underweight."
GE-owned television network NBC won Vivendi Universal(V)'s auction on Tuesday with a proposed merger to create a new entertainment company worth more than $40 billion. Shares of GE rose 68 cents, or 2.2 percent, to $31.12. Shares of Vivendi were up 34 cents, or 1.9 percent, to $18.61.
In other merger news, Caremark Rx Inc. (CMX) has agreed to buy AdvancePCS (ADVP) for just over $5 billion in stock and cash, reducing to three the number of major players in the U.S. drug-buying industry. Shares of Caremark fell $2.10, or 8.3 percent, to $23.30. AdvancePCS shares rose $7.45, or 18.6 percent, to $47.45.
Upbeat investors, shrugged off New York Attorney General Eliot Spitzer's announcement of a $40 million settlement with a hedge fund which allegedly engaged in illegal trading schemes with several mutual-fund firms. A probe into the extent of these practices in the mutual fund industry is continuing.
"News that would be considered bad a year ago — whether on the political side, or terrorism or investigations into the markets — is not being focused on," said Subodh Kumar, chief investment strategist for CIBC World Markets. "The market's focus now is on the economic and earnings recovery."
A report on construction spending, meanwhile, also cheered investors. The Commerce Department said spending rose in July to a seasonally adjusted rate of $879.8 billion. While the 0.2 percent increase from the previous month wasn't as large as analysts' predictions, the pace was still the highest since January.
Volume was heavy with about 1.65 billion shares changing hands on the New York Stock Exchange and 2.32 billion traded on the Nasdaq. Advancers outnumbered decliners by almost 7 to 4 on the NYSE and by 18 to 13 on the Nasdaq.
The Russell 2000 index, a barometer of smaller company stocks, rose 3.21, or 0.6 percent, to 510.71.
Overseas, Japan's Nikkei stock average finished 0.2 percent higher Wednesday. In Europe, France's CAC-40 rose 1.8 percent, Britain's FTSE 100 gained 1.4 percent and Germany's DAX index climbed 2.3 percent.
Reuters and the Associated Press contributed to this report.