NEW YORK (CNN/Money) -
A tech-fueled rally Wednesday pushed the Nasdaq to its highest close since August 2001, but the Dow and the S&P 500 struggled near recent highs on anticipation about Friday's monthly payroll tally.
The Nasdaq composite (up 20.31 to 2077.68, Charts) gained 0.8 percent, closing at a 2-1/2-year high. The Standard & Poor's 500 (up 2.66 to 1126.33, Charts) index gained 0.2 percent, while the Dow Jones industrial average (down 9.63 to 10529.03, Charts) lost 0.1 percent.
The criss-cross action of the market Wednesday was consistent with the trend during the last week or two, with investors rotating money back into tech after favoring more traditional blue chips for most of December.
2003's stock rally was good for most sectors, but in particular, the technology-heavy Nasdaq benefited, gaining around 50 percent for the year. That led to the rotation in December. However, with blue chips having gained so much in such a short period, the Dow and S&P 500 were likely to continue to stall a little in the short term, said Robert Long, vice president of investments at Melhado Flynn & Associates.
"There's a lot of optimism about the earnings due in the next few weeks, and right now that's concentrated in technology, with people feeling upbeat about tech earnings and spending, which is why you've been seeing the Nasdaq perform a little better than the others this last week," Long added.
All three major indexes are apt to remain volatile during the next few sessions amid anticipation of Friday's December employment report and the start of the earnings reporting period, analysts said.
Results from Alcoa (AA: down $0.29 to $38.20, Research, Estimates) Thursday after the close of trade will bring the start of the quarterly earnings reporting period. However, the earnings reporting won't heat up in earnest until the following week. Alcoa is forecast to have earned 34 cents per share, according to a consensus of analysts surveyed by First Call. The aluminum maker and Dow component earned 16 cents in the same quarter a year earlier.
After hitting the recent highs, "the market's sitting right on an inflection point where it's either going to go a lot higher, or a lot lower first. My sense is that we'll see a period of consolidation in response to good news, namely, the earnings reports," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
This week, Wall Street's attention will likely focus mainly on Friday's December jobs report. A consensus of economists surveyed by Briefing.com expects employers added 148,000 new jobs to their payrolls, after adding 57,000 in November. The unemployment rate is forecast to hold steady at 5.9 percent. A Challenger Gray & Christmas survey released Tuesday said job cuts announced by U.S. employers fell modestly in December, and for all of 2003 were down 16 percent.
The number is important, Heekin said, because "people are going to be watching anything that will give them a glimpse of GDP and that includes the labor market and manufacturing."
Ahead of that, Thursday brings the weekly tally on jobless claims, due before the bell. The number of Americans filing new claims for unemployment is forecast to have risen to 345,000 last week from 339,000 the previous week. Less market moving, reports are also due after the bell on wholesale inventories and consumer credit in November.
Wednesday's market
In corporate news, Nortel Networks (NT: up $0.92 to $5.68, Research, Estimates) gained 19 percent and was the NYSE's most active on news that Verizon Communications (VZ: up $0.07 to $36.56, Research, Estimates) will use the company as its Voice Over Internet Protocol (VoIP) gear provider, leading brokerage UBS to upgrade the stock to "buy" from "neutral." VoIP is technology that allows for making phone calls over the Internet.
Sonus Networks (SONS: down $0.89 to $7.60, Research, Estimates), which had also been in consideration for the lucrative Verizon contract, fell 10.5 percent in active trade after Nortel was awarded the deal.
Intel (INTC: up $1.09 to $33.99, Research, Estimates) gained 3.3 percent after Bernstein Research upgraded the stock to "outperform" from "market perform."
JDA Software (JDAS: down $2.97 to $15.00, Research, Estimates) tumbled 16.5 percent after it warned late Tuesday that its fourth-quarter profit will miss expectations by a wide margin, since the company failed to sign a number of software contracts.
No. 2 electronics retail chain Circuit City (CC: down $1.18 to $8.92, Research, Estimates) fell just under 12 percent after the company said sales at stores open a year or more fell 2 percent in December, when analysts were looking for a rise.
Market breadth was positive. On the New York Stock Exchange, where nearly 1.70 billion shares traded, winners edged losers. On the Nasdaq, where almost 2.26 billion shares changed hands, advancing stocks outnumbered decliners by nine to seven.
Treasury prices edged higher, sending the 10-year note yield down to 4.24 percent from 4.27 percent late Tuesday. The dollar edged fractionally higher versus the euro and yen, recovering slightly from its continued erosion this week.
NYMEX light sweet crude oil futures fell 8 cents to settle at $33.62 a barrel. COMEX gold fell 90 cents to settle at $422.30 an ounce.
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