NEW YORK (CNNfn) - The Nasdaq composite index soared Wednesday to a record high -- its 10th this year -- as investors renewed their faith in the potential of large technology companies to fuel economic growth regardless of higher interest rates.
But the Dow Jones industrial average fell as Federal Reserve Chairman Alan Greenspan signaled the white-hot economy must be slowed with tighter credit.
"If you want to play this market it's hard to resist technology," said Terrence Gabriel, stock market strategist at IDEA Global.com. "The lure is tremendous, so it becomes self-perpetuating."
The tech-heavy Nasdaq snapped a two-day losing streak, rising 168.11 points, or nearly 4 percent, to a record 4,550.23. The climb, also a record point gain, topped the Nasdaq's previous high of 4,548.92 set Feb. 17. 
"Today's rally is the same script and the same old story," Ash Rajan, market analyst at Prudential Securities told CNNfn's Street Sweep. "The disconnect between the Dow and the Nasdaq; and technology shares, especially semiconductor shares, software, e-commerce and wireless making new highs."
The Dow, meanwhile, fell 79.11 points to 10,225.73, after Greenspan, in testimony before the Senate Banking Committee, signaled that more interest rate hikes lie ahead - a development that could crimp corporate profits
The broader S&P 500 index rose 8.52 points to 1,360.69.
Despite the gains, more stocks on the New York Stock Exchange fell than rose. Decliners led advancers 1,768 to 1,228. Big Board volume rose to 977 million shares.
But winners topped losers 2,174 to 2,006 on the Nasdaq, where more than 1.8 billion shares changed hands.
In other markets, the dollar rose against the yen and euro. Treasury securities fell.
Nasdaq leads the way
The Nasdaq, down for the last two sessions, surged as investors returned to the market's proven technology leaders.
Cisco (CSCO: Research, Estimates) surged 14-11/16 to 138-5/8. Oracle (ORCL: Research, Estimates) rose 3-3/4 to 63-1/16. Qualcomm (QCOM: Research, Estimates) catapulted 16-5/16 to 146-7/8.
Explaining the gains, analysts cited the belief that the technology companies that move the Nasdaq will lead the economy, outpacing industries like retail, consumer products makers and drug companies.
"I think what investors realize is that technology offers the best opportunity for growth," Greg Smith, chief market strategist at Prudential Securities, told CNNfn.
Further, an expected jump in borrowing costs is not seen derailing the growth of technology companies, which rely less on issuing bonds to raise money.
"People feel the growth is there whether you push rates up to 6.50 percent or 6.80 percent," IDEA Global.com's Gabriel said.
Analysts also pointed to a comment by Greenspan to Congress suggesting the Fed is not focusing on rising stock prices. (WAF 249K) (AIF 249K).
"This is the first time he came out and said 'look, the stock market is not my target,' " Prudential's Rajan said.
Still, many Dow stocks came under pressure as Greenspan in his testimony signaled that more interest rate hikes lie ahead. Tighter credit can hurt corporate profits by raising borrowing costs.
"I think it's clear that Greenspan is saying 'I may be starting a process of tightening,'" David Jones, chief economist at Aubrey Lanston, told CNNfn's In the Money. "He's going to do as much tightening as he needs to do to get the job done."
Drug maker Merck (MRK: Research, Estimates) dipped 2-3/8 to 63-1/8, and Johnson & Johnson (JNJ: Research, Estimates) lost 2-1/2 to 76-1/8. Among financial-services firms J.P. Morgan (JPM: Research, Estimates) fell 7/16 to 109-5/8 and CitiGroup (C: Research, Estimates) lost 3/8 to 50-5/8.
Still, with the Dow off more than 10 percent year-to-date -- the point analysts consider a market correction -- investors found some bargains.
Among them, Minnesota Mining & Manufacturing (MMM: Research, Estimates) jumped 2-3/16 to 92-5/16.
Rates seen rising
In the second leg of his semi-annual testimony to Congress, the Fed chief said labor markets remain tight, increasing pressure on employers to hike wages. And the rising stocks market has exacerbated the wealth effect, which prompts consumers to spend more because they feel wealthier.
The strength indicates the Fed's four interest rate increases since last June haven't slowed the U.S. economy. The nation's gross domestic product surged 5.8 percent in the fourth quarter. Still, Greenspan remained balanced, pointing out that aside from rising prices for commodities like oil, inflation remains tame.
Buyouts, earnings
MGM Grand Inc. (MGM: Research, Estimates) fell 1/16 to 24 after the casino operator offered to acquire rival Mirage Resorts Inc. for nearly $3.3 billion. Mirage (MIR: Research, Estimates) jumped 3-5/8 to 14-1/2.
French telecom equipment maker Alcatel (ALA: Research, Estimates) fell 4 to 43-3/4 after announcing it will acquire Canadian telecom switching company Newbridge Networks (NN: Research, Estimates) in an all-stock deal valued at $7.1 billion. Newbridge fell 1-1/2 to 32-7/8.
Federated (FD: Research, Estimates), the owner of Macy's and Bloomingdale's, fell 13/16 to 34-3/16 after posting net income of $448 million, or $2.04 a diluted share, for the quarter ended Jan. 29. And Consolidated Stores (CNS: Research, Estimates) lost 1/16 to 12-1/2 after reporting quarterly net income of $119.3 million, or $1.06 a diluted share.
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