Stocks rally, Dow hits record

Major gauges rise, led by the Nasdaq composite after upbeat quarterly results from Yahoo and Sun Microsystems.

By Alexandra Twin, senior writer

NEW YORK ( -- Stocks surged Wednesday, with the Dow hitting a new all-time high, as upbeat earnings from Yahoo and Sun Microsystems tempered worries about technology sector earnings.

The Dow Jones Industrial average (up 87.97 to 12,621.77, Charts) rose 0.7 percent and closed at a record high, taking out the previous record from a week ago. The broader S&P 500 (up 12.14 to 1,440.13, Charts) index added nearly 0.9 percent, closing at the highest point since Sept. 2000.

The Nasdaq (up 34.87 to 2,466.28, Charts) composite gained 1.4 percent.

After the close of trade, eBay (Charts) reported higher quarterly earnings that topped forecasts. The online auctioneer also issued a bullish first quarter and full-year profit outlook. Shares jumped 10 percent in extended-hours trading.

Also after the close, Qualcomm (Charts) reported higher fiscal first-quarter earnings that topped estimates on higher quarterly revenue that missed estimates. The designer and seller of chips for mobile phones also issued a fiscal second-quarter forecast that is roughly in line with estimates and reaffirmed its 2007 financial outlook. Shares gained about 1 percent in extended-hours trading.

Thursday morning brings earnings from Dow component AT&T (Charts), as well as Bristol-Myers Squibb (Charts), Ford Motor (Charts) and Nokia (Charts), among others. Thursday also brings the December existing home sales report.

Worries about slower earnings growth and a run up in oil prices have weighed on stocks of late. But those concerns were tempered Wednesday by a slew of improved quarterly results.

"Some of the earnings that came out last night are in the plus and that's helping technology and the rest of the market," said Peter Cardillo, chief market economist at Avalon Partners.

The President's State of the Union address Tuesday night also helped recharge the rally, he said.

"I think the underlying tone for the market continues to be positive, so even when there is weakness, like on Tuesday, it it seems to be more technical than fundamental in nature," said Ted Weisberg, New York Stock Exchange floor trader at Seaport Securities.

Weisberg said that he suspected Wednesday's strength was more a reinforcement of the positive trend that stocks have been in for the past three or four months than just a reaction to the day's earnings.

Late Tuesday, Yahoo (up $1.98 to $28.94, Charts) reported fourth-quarter sales and earnings that rose from a year ago and topped estimates. Yahoo also announced an early launch for "Project Panama," its enhanced search engine that is expected to boost ad revenue.

The Internet search behemoth forecast first-quarter and full-year 2007 profit that is short of forecasts, but investors focused on the positive news and sent shares higher Wednesday.

Also late Tuesday, Sun Microsystems (up $0.49 to $6.15, Charts) said that it swung to a profit versus a year-ago loss, owing to higher sales of its computer servers. Shares jumped 8.6 percent Wednesday.

The improved results were welcomed by investors who have been concerned about tech earnings following last week's barrage of disappointing results or forecasts from companies such as Intel (up $0.29 to $20.84, Charts) and Apple (up $1.00 to $86.70, Charts).

Roughly 25 percent of the S&P 500 has reported results as of Wednesday morning. Earnings are currently on track to grow about 9.2 percent from a year ago, according to Thomson Financial. That makes the fourth quarter of 2006 the slowest for earnings growth in nearly five years.

Earnings galore

Among other stocks moving on quarterly results, Corning (up $2.06 to $20.90, Charts) surged almost 11 percent in active trading after reporting higher fourth-quarter sales and earnings that topped estimates. Corning also warned that first-quarter profit won't meet expectations.

Cell phone chip maker RF Micro Devices (up $0.94 to $7.82, Charts) reported better than expected earnings late Tuesday and issued a current-quarter forecast that is above analysts' projections. Shares gained 11 percent Wednesday.

AT&T rallied on news that subsidiary Cingular Wireless posted sharply higher fourth-quarter profit.

On the down side, Advanced Micro Devices (down $1.48 to $16.03, Charts) reported a quarterly loss late Tuesday versus a profit a year earlier. The results were worse than analysts were expecting. The chip maker also issued first-quarter profit guidance that is short of forecasts.

On Wednesday morning, Dow component McDonald's (down $0.69 to $44.16, Charts) reported fourth-quarter results that surged from a year earlier and met analysts' per share earnings forecast. However, market participants took a "sell the news" reaction and sent shares lower.

Market breadth was positive. On the New York Stock Exchange, winners topped losers 11 to 5 on volume of 1.58 billion shares. On the Nasdaq, advancers beat decliners 2 to 1 on volume of 2.24 billion shares.

Investors also digested President Bush's State of the Union address from Tuesday night in which he asked Congress to reform federal spending, called for a cutback in gasoline consumption and also introduced a tax deduction to help pay for health insurance. Other topics included the Iraq war and greenhouse emissions. (Full story).

U.S. light crude oil for March delivery rose 33 cents to settle at $55.37 a barrel on the New York Mercantile Exchange.

The price of oil had slipped in the morning following the release of the weekly oil inventories report, which showed a surprise increase in distillates, used in heating oil. Oil prices rose almost 5 percent Tuesday.

COMEX gold for February delivery rose $2.30 to settle at $648.20 an ounce.

Treasury prices were little changed, with the yield on the benchmark 10-year note at 4.81 percent, roughly where it stood late Tuesday.

In currency trading, the dollar rose versus the euro and fell versus the yen.

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