NEW YORK (CNNmoney) - Upbeat forecasts from the wireless and software sectors helped send the Nasdaq composite index to a seven-week high Wednesday as investors bet technology profits will rebound next year.
Shares of Nextel Communications and Citrix Systems rallied after issuing positive financial outlooks. AT&T Wireless gained for a second day after posting better-than-expected earnings.
While a 10 percent slide in Eastman Kodak, which issued a profit warning, kept the Dow Jones industrial average from a bigger gain, weak earnings have not hurt the major indexes this month as investors bank on better economic times ahead.
"There are signs out there that the market is discounting this (economic improvement) six-to-nine months out," Mark Donahoe, trader at US Bancorp Piper Jaffray, told CNNfn's Halftime Report.
Earnings are expected to fall more than 20 percent in the latest quarter, one of the worst profit periods in a decade. And the Federal Reserve's periodic assessment, issued Wednesday, said the economy is still suffering from the Sept. 11 terrorist attacks.
But Wall Street is optimistic. Stocks have gained strongly since Sept. 21 as investors look to a possible profit rebound in 2002.
"Earnings are a mixed bag, but it seem like tech stocks are starting to turn the corner," said David Briggs, head of equity trading at Federated Investors, who turned bullish Monday.
Briggs said he's encouraged by the market's ability to rise on pullbacks. He also likes how stocks generally rally on good news and fail to tumble on disappointments. Finally, low bond and cash yields have made stocks more attractive.
The Nasdaq composite index rose 27.10 points, or 1.6 percent, to 1,731.547, its highest close since Sept 5, when the index ended at 1,759.01. The Dow Jones industrial average rose 4.54 to 9,345.62 and stands more than 13 percent above its Sept. 21 low.
The Standard & Poor's 500 rose 0.42 to 1,085.20.
On the New York Stock Exchange, declining stocks topped advancing ones 1,735 to 1,359 as 1.3 billion shares changed hands. Nasdaq winners edged losers 1,938 to 1,650 as 1.8 billion shares traded.
In other markets, Treasury securities advanced. The dollar edged higher against the yen and dipped versus the euro.
Numbers roll in
Nextel Communications (NXTL: up $1.29 to $8.69, Research, Estimates) lost less money in the most recent quarter than analysts expected as sales rose. In a conference call, the wireless company said it expects to add 1.9 million-to-2 million net subscribers in 2001, Reuters said.
Citrix Systems (CTXS: up $3.35 to $24.72, Research, Estimates), a software maker, said profit rose to 14 cents a share from 11 cents, topping estimates. Sales should continue growing in the low 20 percent annual rate in the fourth quarter and that pace should keep up in 2002, company executives later said, according to Reuters.
Shares of AT&T Wireless (AWE: up $0.60 to $14.80, Research, Estimates) rallied for a second day after posting earnings that topped forecasts.
The Dow's biggest loser, Eastman Kodak (EK: down $3.46 to $30.71, Research, Estimates), warned that results in the current quarter will fall short, and that it will cut more jobs. The photography company's profit met forecasts of 52 cents a share.
Also falling, AT&T (T: down $1.36 to $16.34, Research, Estimates) said profit tumbled to 4 cents a share, matching forecasts. Lehman Brothers, worried about the company's ability to grow, cut profit targets for the long-distance provider.
DuPont (DD: down $0.81 to $41.29, Research, Estimates) said operating earnings tumbled 75 percent to 12 cents a share, beating estimates.
The third-quarter loss for Amazon.com (AMZN: down $1.91 to $7.64, Research, Estimates) narrowed to 16 cents a share. The online retailer cut sales forecasts for the current quarter but repeated a vow to earn a profit, excluding certain items including the company's debt. Merrill Lynch cut its financial guidance for Amazon.
Compaq Computer (CPQ: up $0.34 to $9.74, Research, Estimates), lost $120 million, or 7 cents a share, matching forecasts.
In the aerospace sector, Honeywell International (HON: up $0.69 to $28.29, Research, Estimates) hit lowered third-quarter earnings forecasts and said it is on target to meet or exceed fourth-quarter estimates. The company also said it is cutting more jobs.
But the parent of American Airlines, AMR (AMR: down $0.25 to $19.70, Research, Estimates), lost $3.40 per share in the third quarter, a period when travel slowed following the Sept. 11 terrorist attacks.
Retailer Sears Roebuck(S: up $0.52 to $38.31, Research, Estimates) said it earned 80 cents a share, matching forecasts, and announced job cuts.
More than 60 percent of companies in the S&P 500 have reported quarterly results, according to First Call. Chuck Hill, First Call's director of research, said he expects profits to decline 22.2 percent once all the numbers are in.
The Sept. 11 attacks shaved about 5 percentage points off those numbers, said Hill, who expects the attacks' effect to worsen in the current quarter. (354K WAV) (354K AIF)
Chip demand slumped last month. A trade group, Semiconductor Equipment and Materials International, said orders and shipments tumbled more than 10 percent in September. But shares of No. 1 chip maker Intel (INTC: up $0.48 to $25.48, Research, Estimates) rose.
Continued worries about anthrax
On the anthrax front, a second New York Post employee has contracted the skin form of the disease. On Tuesday, a White House spokesman said anthrax was found at a site handling mail for the executive mansion and nearby offices. However, President Bush said he does not have the deadly bacteria. The nationwide anthrax death toll stands at three as the country remains anxious about bio-terrorism.
"It's one eye on the news, and one eye on the markets," Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum, told CNNfn's Market Call.
Bob McCooey, trader at the Griswold Co., said any breakthrough in the war on terrorism or the containment of anthrax could lift stocks. "What you have is a pretty positive market," McCooey told CNNfn's Market Call.
Stocks have posted strong gains since Sept. 21 amid growing forecasts that the economy will recover next year.
To spur growth, the Federal Reserve next month is expected to cut borrowing costs for the tenth time this year.
Thursday holds more economic information. In addition to weekly jobless claims, the session brings the employment cost index for the third quarter, which is expected to have risen 0.9 percent, according the consensus estimate of economists surveyed by Briefing.com. September orders for durable goods, due Thursday, are expected to have declined 1 percent. Existing home sales are forecast to have fallen last month to an annual rate of 5.20 million units. 
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