NEW YORK (CNN/Money) -
U.S. stocks markets rallied Wednesday for the second consecutive session as investors continued to find bargains in a variety of sectors after an almost week-long selloff.
The Nasdaq composite (up 33.67 to 1976.76, Charts) rallied 1.7 percent, the Dow Jones industrial average (up 115.63 to 10300.30, Charts) added 1.1 percent and the Standard & Poor's 500 (up 13.05 to 1123.75, Charts) index gained about 1.2 percent.
After falling for most of last week and Monday, stocks recovered Tuesday, ending a very volatile session with strong gains. Investors digested a slew of rumors and reports concerning global security and sorted through the Federal Reserve's decision to hold interest rates at more than 40-year lows and its indication it would keep them there for the foreseeable future.
The market sustained its strength into Wednesday, helped by the session's corporate news, including better-than-forecast earnings from Bear Stearns and FedEx and an upgrade of Yahoo!.
"We've had the correction people were calling for, and now you have investors coming back in," said Robert Long, vice president of investments at Melhado, Flynn & Associates.
"Concerns about the weak February payrolls tally and the terrorism scare in Madrid were cited as reasons for the declines last week, but the market had been setting itself up for a pullback anyway," Long added. "With that correction past, you're seeing people buying on the dips."
However, analysts cautioned that a period of consolidation after Wall Street's extended rally may not yet be over and that it will take more than a couple of sessions of gains to determine where the market is headed in the next few months.
Thursday brings quarterly results from Morgan Stanley (MWD: Research, Estimates) before the bell. The Wall Street bank is forecast to have earned 96 cents per share, according to First Call estimates, up from 82 cents a year earlier.
Thursday also brings a number of economic reports. The weekly jobless claims report is due before the open and will likely show that new claims for unemployment rose to 345,000 last week from 341,000 the previous week, economists surveyed by Briefing.com expect. Also due before the open is the long-delayed January read on producer prices.
After the start of trading, the report on leading economic indicators for February is due and it is expected to show a gain of 0.1 percent after gaining 0.5 percent in January. The Philadelphia Fed index, a regional manufacturing survey, is also due and is expected to have fallen to 30 from 31.4 last month.
What moved
Yahoo! (YHOO: up $2.28 to $44.85, Research, Estimates) rallied 5.3 percent after a pair of brokerage upgrades. Smith Barney upgraded it to "buy" from "hold" and raised its 12-month price target to $60 from $50. First Albany also upgraded the stock to "buy" from "neutral." Both firms cited the recent weakness in Yahoo!'s stock price. They also cited a pickup in the online ad market and said that search volumes and costs have been inching up.
The stock was one of several supporting Nasdaq gains. Other big cap technology companies lifting the Nasdaq included Intel (INTC: up $0.63 to $27.79, Research, Estimates), up 2.3 percent, and Cisco Systems (CSCO: up $0.38 to $23.50, Research, Estimates), up 1.6 percent.
Of the 30 blue chips that comprise the Dow industrials, 27 gained.
Financials were strong after Bear Stearns (BSC: up $0.74 to $88.74, Research, Estimates) reported a higher-than-forecast quarterly profit early Wednesday, echoing Lehman Bros.' (LEH: up $0.91 to $85.95, Research, Estimates) upbeat quarter reported on Tuesday. Bear Stearns said it earned $2.57 per share, up from $2 a year ago and more than the $2.05 analysts surveyed by First Call were expecting. Its stock gained 0.8 percent, but other financials gained more, including Dow stock JP Morgan (JPM: up $0.95 to $42.28, Research, Estimates), up 2.3 percent.
FedEx (FDX: Research, Estimates) also reported results before the bell Wednesday. The express delivery company reported earnings of 71 cents per share, up from 49 cents a year earlier and higher than the 67 cents per share analysts surveyed by First Call were forecasting. FedEx shares gained 4.6 percent.
On the downside, shares of Agere Systems (AGR.A: down $0.18 to $3.23, Research, Estimates) fell 5.3 percent in active New York Stock Exchange trade after the chip gear maker warned that sales and earnings in the just-completed quarter will fall short of expectations because of weak sales of certain mobile phone chip sets.
Market breadth was overwhelmingly positive but volume was light. On the New York Stock Exchange, gainers beat losers by more than three to one on volume of 1.46 billion shares. On the Nasdaq, where 1.64 billion shares changed hands, advancers outnumbered decliners by close to three to one.
Rally short-lived?
Despite the upbeat tone Wednesday, analysts continued to caution that the period of consolidation after the rally of 2003 and early 2004 is probably not over and may continue until at least the first-quarter earnings reporting period heats up, in early April.
"There's nothing fundamental driving these gains," said Tim Heekin, head of stock trading at Thomas Weisel Partners. "The Nasdaq had sold off over 10 percent, the Dow and the S&P had started to correct as well, so you're seeing a bounce off of that."
In addition, the market is likely to be volatile ahead of Friday's options expiration. Friday is a quadruple expiration day, the last trading day before stock index futures and options, as well as individual stock futures and options, all expire simultaneously. The sessions leading up to this 'quadruple witching' tend to be volatile, Heekin said, as traders position themselves.
Investors seemed to take in stride the day's only economic report, which showed that consumer prices, as well as core prices -- which excludes food and energy -- gained in February, largely in line with forecasts.
The positive momentum Wednesday also enabled investors to process calmly what might have proved unsettling last week: afternoon reports that a bombing in Baghdad destroyed a hotel, killing several people. The stock market had tanked in part last week on fears about global terrorism, following the series of coordinated bombings in Madrid that left more than 200 people dead and at least 1,000 injured.
Treasury prices edged lower. The 10-year note lost 5/32 of a point in price, pushing its yield up to 3.70 percent, unchanged from late Wednesday. Prices and yields move in opposite directions. The dollar bounced off of earlier lows versus the yen and euro.
Among commodities markets, NYMEX light sweet crude oil futures rallied 97 cents to $37.65 a barrel. COMEX gold rallied $4.50 to $407.10.
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