NEW YORK (CNN/Money) - An earnings miss and warning from book retailer Barnes & Noble countered an upgrade of No. 1 software maker Microsoft to paint a mixed outlook for Thursday's stock markets.

Barnes & Noble (BKS: Research, Estimates) reported fiscal second-quarter earnings of 2 cents a share, well below the First Call consensus estimate of 10 cents. It also reduced its earnings and sales forecast for the rest of the current fiscal year.

Upscale household goods seller Williams-Sonoma (WSM: Research, Estimates) said it earned 12 cents a share for the quarter, up from a penny a share for the same period last year and better than analysts' 8-cent average expectation. Also, apparel store operator Limited (LTD: Research, Estimates) posted earnings of 16 cents a share, 4 cents better than Wall Street expectations. Shares of Limited rose 90 cents in pre-market trading.

Before the bell, investment bank Salomon Smith Barney upgraded shares of Microsoft to "outperform" from "neutral," indicating more confidence in the software maker. Shares of Microsoft (MSFT: Research, Estimates) rose $1.07 to $53.35 ahead of the open.

For details about Wednesday's market activity, click above

After a long stretch in which blue chips dominated market activity, tech issues rose to the lead in Wednesday's market, propelling the Nasdaq composite index to a more than 2.3 percent gain.

Among the factors in the advance was the agreement under which AOL Time Warner (AOL: Research, Estimates), parent of CNN/Money, will buy out AT&T (T: Research, Estimates)'s stake in the Time Warner Entertainment cable venture, and the announcement by Advanced Micro Devices (AMD: Research, Estimates) of a new Athlon semiconductor.

Technology stocks are often the leaders when a bull market gets started. But, until Wednesday, they had not taken charge in the big gains for the major indexes over the past month; utility issues, normally the top performers in defensive markets, are doing best in the current advance, according to Standard & Poor's.

"Normally at the beginning of a bull market you would want to be in the economically sensitive stocks, and that's not what's running at the moment," said Merrill Lynch global strategist David Bowers.

The Dow Jones industrial average gained 85 points Wednesday, while the Nasdaq was more than 32 points higher.

Asian-Pacific stocks finished higher Thursday, with Tokyo's Nikkei index up 1.8 percent. European markets advanced in early trading.

Treasury prices fell in early trading, sending the 10-year note yield up to 4.24 percent from 4.20 percent late Wednesday. The dollar gained against the yen and euro.

Brent oil futures fell 4 cents to $27.37 a barrel in London, where gold was lower in early trading.

Before the markets opened, the Labor Department said weekly first-time unemployment claims fell to 389,000 in the week ended Aug. 17 from a revised 391,000 the prior week. Economists, on average, expected 385,000 new claims, according to Briefing.com

Fiber-optic equipment maker Ciena (CIEN: Research, Estimates) said it lost 16 cents per share for the quarter, which was better than analysts' average expectation of a loss of 19 cents. Shares of Ciena fell 43 cents to $4.06 in pre-market trading.

Among the companies reporting after the close are book seller Borders Group (BGP: Research, Estimates) and network software developer Novell (NOVL: Research, Estimates).

Investors may also look closely at the financial sector, digesting reports of downgrades and possible rating cuts to some of the largest investment banks.

Late Wednesday, Moody's Investors Service threatened to cut J.P. Morgan Chase (JPM: Research, Estimates) long-term ratings, citing concern about the investment bank's profits and the degree to which Enron's bankruptcy could hurt J.P. Morgan's reputation. Shares of J.P. Morgan fell 73 cents to $26.15 in pre-market trading.

In addition, Merrill Lynch cut earnings estimates on brokerage houses Goldman Sachs (GS: Research, Estimates), Lehman Brothers (LEH: Research, Estimates) and Morgan Stanley (MWD: Research, Estimates).

Investment bank Credit Suisse First Boston initiated coverage on electronic equipment manufacturer Ametek (AME: up $0.92 to $34.92, Research, Estimates) Thursday with a "buy" rating and a price target of $40 a share. Shares of Ametek gained 92 cents to $34.92 in trading Wednesday.

Merrill Lynch said it expects Marvell Technology (MRVL: Research, Estimates) to forecast lower gross margins when it reports earnings for the July quarter after the bell and that the company will increase revenue by 7 percent in the October quarter due to benefits from a technology transition. Shares of Marvell rose 78 cents to $19.30 in trading Wednesday.