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NEW YORK (CNN/Money) -
Stocks rallied Wednesday, gaining for the third out of four sessions, as investors continued to scoop up technology, homebuilders and other shares battered in the month of October.
The Nasdaq composite (up 30.26 to 2,144.31, Charts) jumped about 1.4 percent, closing at its highest level since October 3rd.
The Dow Jones industrial average (up 65.96 to 10,472.73, Charts) added 0.6 percent and the S&P 500 (up 12.00 to 1,214.76, Charts) index rose 1 percent.
"You're seeing buying in the market that has been absent for several months," said Barry Hyman, equity strategist at Ehrenkrantz King Nussbaum.
The buying was sparked by a variety of factors, Hyman said, including the fact that the major gauges have cleared key technical hurdles that kept stocks in see-saw mode throughout October.
"We've come out of one of the most volatile Octobers that I can remember, with multiple days of (major gauges) moving up or down 1 percent, but not really going anywhere," Hyman added. "I think that volatility will lessen through the end of the year, and that lessening will prove satisfying to investors."
Beyond the technical factors that support a stock advance, Hyman said renewed optimism about the economy was fueling stocks, coupled with a sense that a few more rate hikes may be tolerable if the end result is keeping inflation in check.
Stock investors seem to be factoring in short-term interest rates of 4.5 percent by late January, at the end of Federal Reserve Chairman Alan Greenspan's term. On Tuesday, the central bank boosted the Fed funds rate, an overnight bank lending rate, by a quarter-percentage point to 4 percent. It was the 12th hike in a row.
Gainers on Wednesday's session included some of the leaders from earlier in 2005, including technology, homebuilding and energy. In addition, the financial sector edged up, an important leader for the S&P 500.
After the close, Priceline.com (Research) reported higher quarterly earnings that topped estimates, sending the stock sharply higher in extended-hours trading.
Clorox and Comcast report earnings Thursday morning.
Economic reads due Thursday include weekly jobless claims, third-quarter productivity, factory orders and the Institute for Supply Management's read on the services sector of the economy.
What moved?
Gains were broad, covering a number of sectors.
Among the movers, homebuilders surged, with Toll Brothers (up $2.89 to $39.88, Research) and D.R. Horton (up $1.93 to $33.09, Research) leading the list of gainers. The Dow Jones Home Construction (unchanged at $917.44, Research) index gained 5 percent.
The influential chip sector also bounced, after getting hit hard Tuesday. Chip leader Intel (up $0.72 to $23.37, Research) climbed 3.2 percent. The Philadelphia Semiconductor (up 12.68 to 441.22, Charts) index, or the SOX, gained 3 percent.
Other big cap tech gainers included Apple Computer (up $2.45 to $59.95, Research), Microsoft (up $0.50 to $26.46, Research) and eBay (up $0.81 to $41.08, Research).
A gain in oil service stocks sent the Amex Oil (up 17.22 to 1,005.85, Charts) index up by 1.7 percent.
Among stocks moving on earnings news, Time Warner (up $0.33 to $17.90, Research) gained 1.9 percent after reporting higher quarterly earnings that topped estimates and boosting its stock buyback plan. Time Warner is the parent of CNN/Money.
On the downside, select tech and telecom companies issued earnings or forecasts that disappointed investors.
Symantec (down $4.63 to $19.37, Research) warned late Tuesday that current-quarter earnings and revenue would miss forecasts. The security software maker also reported higher quarterly earnings -- excluding charges -- that rose from a year ago. Shares fell more than 19 percent.
Shares of Mercury Interactive (down $9.34 to $25.66, Research) plunged close to 27 percent after the company's chief executive and chief financial officer resigned and the company said it would delay earnings, all related to an internal investigation that revealed the misuse of stock option grants.
Sun Microsystems (down $0.12 to $3.73, Research) slumped over 3 percent after reporting late Tuesday a narrower net loss versus a year earlier that was in line with analysts' forecasts.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by three to one on volume of nearly 2 billion shares. On the Nasdaq, advancers topped decliners by seven to three as 2.21 billion shares changed hands.
U.S. light crude oil for December delivery fell 10 cents to settle at $59.75 a barrel on the New York Mercantile Exchange. Oil prices briefly sank below $59, touching $58.95 a barrel for the first time since late July, following the release of the weekly oil inventory report.
"If energy keeps moderating, that will help to dampen whatever fears of inflation are out there," said Jim Dunigan, chief investment officer at PNC Advisors.
"Stocks can keep marching higher to an extent," he added, "but I don't think we can break out of a range until we have a better sense of when the Fed is going to stop raising rates."
Treasury prices slipped, raising the yield on the 10-year note to 4.60 percent from 4.56 percent late Tuesday. Treasury prices and yields move in opposite directions.
The dollar slipped versus the euro and gained versus the yen.
COMEX gold rose $4 to settle at $464.60 an ounce.
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