NEW YORK (CNN/Money) -
The Dow and S&P 500 hit fresh 22-month highs Wednesday while the Nasdaq closed little changed as investors used strong tech earnings as an incentive to cash out and put their money into blue chips.
The Dow Jones industrial average (up 94.96 to 10623.62, Charts) rallied 0.9 percent, closing at its highest level since March 19, 2002. The Standard & Poor's 500 (up 8.85 to 1147.62, Charts) index gained about 0.8 percent, closing at its highest tally since March 22, 2002. Both indexes had traded lower in the morning and early afternoon.
The Nasdaq composite (down 5.53 to 2142.45, Charts) lost 0.25 percent, recovering from steeper losses earlier in the session.
"You're seeing a rotational move out of the high technology names that have rallied the most and into some stocks that analysts still perceive as having room to expand," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
"We are incredibly overbought by all technical measures," he added. "The question is, 'When are we going to run out of steam?' The anticipation about the fourth-quarter earnings was positive, but there is less certainty about the first quarter."
After the close Wednesday, online auctioneer eBay (EBAY: Research, Estimates) reported earnings of 24 cents per share, up from a year earlier and more than what analysts had forecast, sending shares higher.
Additionally, after the close Wednesday, wireless chipmaker Qualcomm (QCOM: Research, Estimates) reported earnings that topped estimates and rose from a year earlier, but cautioned that current quarter revenue will show a sharp sequential decline. Shares were little changed after the bell.
AT&T (T: Research, Estimates), BellSouth (BLS: Research, Estimates), Eastman Kodak (EK: Research, Estimates), Ford Motor (F: Research, Estimates), Nokia (NOK: Research, Estimates) and Pfizer (PFE: Research, Estimates) are all due to report results before the bell Thursday.
Investors will also take in reports on last week's jobless claims, which are expected to show virtually no change from the week before, and leading economic indicators for December, forecast to gain 0.2 percent after rising 0.3 percent last month.
Wednesday's market
Stocks Tuesday delivered a mixed performance, with the Nasdaq carving out a new 30-month high with minimal gains, while the Dow and S&P 500 closed barely changed.
But Wednesday marked a shift, with investors taking money out of some of the recent technology gainers and putting it into blue chips, notably financials, which reacted to improved results from JP Morgan Chase (JPM: up $1.01 to $40.10, Research, Estimates) and Merrill Lynch (MER: down $0.58 to $59.60, Research, Estimates).
The switch also reflected the fact that earnings have been unsurprisingly strong so far. Among the companies trading lower despite solid or mixed earnings: Lucent Technologies, Motorola and Advanced Micro Devices.
JP Morgan Chase earned 89 cents per share, up substantially from a year earlier and well above analysts' forecasts, thanks to strength in its investment banking business and lower credit costs. The news boosted the sector, which also found support in Merrill Lynch's strong earnings, although Merrill stock fell during the session.
The telecom and networking sectors, which had paced tech advances over the last few sessions, pulled back Wednesday.
Late Tuesday, Motorola (MOT: down $0.24 to $16.81, Research, Estimates) reported fourth-quarter revenue and earnings per share that rose from a year earlier, and forecast earnings per share for the current quarter that were in line with estimates on revenue that was ahead of analysts' projections. However, the company's cell phone sales were lower than what some analysts were looking for. The stock rebounded slightly in afternoon trading after sliding throughout the session but still closed lower.
A warning about its current quarter sent shares of wireless chip maker R.F. Micro Devices (RFMD: down $2.41 to $9.85, Research, Estimates) barreling 19.6 percent lower. Lucent (LU: down $0.33 to $4.42, Research, Estimates) lost nearly 7 percent even after the company reported buoyant results Wednesday morning.
Additionally, Advanced Micro Devices (AMD: down $1.48 to $15.90, Research, Estimates) also reported a strong quarter late Tuesday, but like Intel (INTC: Research, Estimates), forecast that seasonal tendencies would result in a drop in revenue in the current quarter. AMD's shares dropped 8.5 percent.
Sonus Networks (SONS: down $0.98 to $8.93, Research, Estimates) tumbled nearly 10 percent following news that the telecom equipment maker will delay its fourth-quarter earnings until its 2003 audit is completed. French communications equipment maker Alcatel (ALA: down $0.23 to $16.90, Research, Estimates) late Tuesday said it would not comment on speculation it was interested in acquiring JDS Uniphase (JDSU: down $0.35 to $5.38, Research, Estimates), sending shares of the Canadian fiber optic gear maker down more than 6 percent.
Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners by more than five to three as 1.74 billion shares changed hands. On the Nasdaq, losers edged winners by a narrow margin as 2.38 billion shares traded.
Treasury prices rose, pushing the 10-year note's yield down to 4.02 percent from 4.05 percent late Tuesday. The dollar hovered near the previous session's lows versus the euro and continued to weaken against the yen
NYMEX light sweet crude oil futures fell 29 cents to settle at $34.58 a barrel. COMEX gold settled $2.20 lower at $411.20 an ounce.
-- Deshundra Jefferson contributed to this report.
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