NEW YORK (CNN/Money) - A sudden burst of late-session tech buying Wednesday -- particularly in hard-hit semiconductor and software issues -- jolted stocks out of their earlier doldrums, pushing the market higher by the close.

The Nasdaq composite (up 27.43 to 1320.23, Charts) gained more than 2 percent, while the Dow Jones industrial average (up 44.11 to 8494.27, Charts) and Standard & Poor's 500 index (up 5.98 to 896.14, Charts) both erased earlier losses to close modestly higher. All three indexes had traded lower for most of the morning, with the Nasdaq showing a little more strength.

Market breadth also turned positive. On the New York Stock Exchange, advancers beat decliners 5-to-3 as 1.54 billion shares changed hands. On the Nasdaq, winners beat losers by more than 5-to-3 as 1.57 billion shares traded.

"It's been one of the more interesting days," Jennifer Williams, a floor broker at Griswold Co., told CNNfn's Street Sweep. "Obviously we're reacting less to numbers than to psychology. We're getting back to reacting to the fundamentals and the basics of the economy, and that's refreshing."

While telecom and financial services stocks kept the Dow industrials under the weather, a rally on the Nasdaq, led by a bounce in chipmakers and software, gave the tech-heavy index a late-session jolt.

Semiconductor stocks recovered smartly from recent declines, as investors reapproached KLA-Tencor (KLAC: up $2.16 to $32.71, Research, Estimates), Texas Instruments (TXN: up $0.88 to $14.88, Research, Estimates) and Intel (INTC: up $1.04 to $16.16, Research, Estimates), all of which have issued warnings within the last few sessions.

While it doesn't trade on the Nasdaq, a 16 percent gain in shares of software maker Computer Associates (CA: up $2.65 to $14.75, Research, Estimates), following its better-than-expected profit report, also helped support technology stocks.

After the close of trade, media company AOL Time Warner (AOL: up $0.03 to $13.53, Research, Estimates), the parent of CNN/Money reported a quarterly profit of 19 cents per share, before taxes and other items, in line with expectations but down from the 30 cents earned in the same period a year ago.

However, the company also said that it will restate quarterly results from the third quarter of 2000 through the second quarter of 2002, cutting revenue by $190 million.

"I think this was largely expected. If you spread this over the last two years, it's really not too bad," Qaisar Hasan, a media analyst with Utendahl Capital Partners, told CNNfn. Shares of AOL stock gained 97 cents to $14.49 in after-hours trade Wednesday.

Additionally, No. 1 biotech Amgen (AMGN: up $0.20 to $50.00, Research, Estimates) reported a better-than-expected quarterly profit of 34 cents per share after the bell, two cents better than expected and four cents better than a year earlier.

In general, buying in the most beaten-down sectors, like tech, retail and financial services, has been a relevant factor in the rally that has propelled the Dow more than 17 percent over the past two weeks, said Tim Heekin, head of listed trading at Thomas Weisel Partners.

Although a lot of the buying has come from short-covering in some of these hard-hit sectors, buying interest is also coming from big pension funds and other institutional investors, Heekin said.

Short-covering refers to the process in which investors who have sold shares short to take advantage of a falling market need to buy them back.

"What started this two weeks ago was the big pension funds and other institutions coming in, seeing that bonds were getting over-valued and shifting money out of fixed income and into equities," Heekin said.

The rally was cut short Tuesday amid some mixed profit reports and brokerage comments. Prior to the runup, the indexes had closed down for six consecutive weeks amid concerns about the financial statements coming out now.

"That a stock like KLA-Tencor issues a fairly negative report and people will be buyers of it anyway tells you that profit expectations have been racheted down enough that people are starting to cautiously step back in," Heekin added.

The Dow was more mixed than other indexes, struggling with sharper losses through most of the session and experiencing a milder advance at the turnaround. Merrill Lynch raised its fiscal year 2003 earnings per share estimates for Walt Disney (DIS: up $0.69 to $17.80, Research, Estimates), citing the currently improving ad market's impact on Disney's properties.

But shares of Dow component SBC Communications (SBC: down $1.20 to $25.85, Research, Estimates), as well as Verizon Communications (VZ: down $1.02 to $36.73, Research, Estimates) and BellSouth (BLS: down $0.49 to $25.80, Research, Estimates) all fell after Morgan Stanley downgraded the stocks within a broadly negative note on telecom.

Shares of financial services company Citigroup (C: down $0.04 to $35.49, Research, Estimates), also one of the Dow 30, fell after the New York attorney general's office said it will question the firm's chairman and CEO, Sanford Weill, as it gathers new evidence. The attorney general's office is investigating research activities at Citigroup and at its Salomon Smith Barney brokerage unit.

In addition, drug stocks were weaker after Eli Lilly (LLY: down $4.91 to $58.09, Research, Estimates) warned that current-quarter results will miss forecasts. Also, CIBC World Markets downgraded blue-chip issue Johnson & Johnson (JNJ: down $1.87 to $57.95, Research, Estimates) to "sector perform" from "sector outperform," saying the company's stock has little opportunity to either sustain the level it's at now or to gain in the near term.

Dow 30 members DuPont (DD: down $0.78 to $40.97, Research, Estimates), a chemical maker, and paper products company International Paper (IP: down $0.36 to $37.74, Research, Estimates) both reported better-than-expected quarterly results.

"You started lower today and have pulled a little higher, and even during yesterday's selloff, stocks could have been a lot lower, what with all the negative news, so there's some encouragement in that," said John Hughes, market analyst at Shields & Co. "It shows the market is resilient."

"We'll probably see more of this kind of back-and-forth trade for the next few days," Hughes added. "But that wouldn't be such a bad thing to stall for a little while, as it gives the market time to digest the runup we've had."

Treasury prices rose modestly, sending the 10-year note yield down to 4.22 percent from 4.26 percent late Tuesday. Treasury prices and yields move in opposite directions.

The dollar tumbled against the yen, but was a little stronger versus the euro. Light crude oil futures gained 11 cents to $28.18 a barrel. Gold fell modestly.