NEW YORK (CNN/Money) - U.S. stocks got a much-needed shot in the arm late Wednesday after automaker General Motors upped its earnings estimate and buyers came back for tech stocks despite more concerns about the troubled chip sector.

But some market watchers eyed the rebound with skepticism and said headwinds continue to challenge the markets.

"This [was] an expected recovery from yesterday's selloff," said John Pickett, NYSE trader with LaBranche & Co. "The only thing keeping people invested in stocks is that the [Treasury] bond yields are quite low. So there's no other alternative."

Stocks regained some composure after wobbling earlier in the session on political concerns that the United States plans to bolster its political case to oust Iraqi leader Saddam Hussein.

President Bush said Wednesday he would ask Congress at an appropriate time to support any action on Iraq. The president also said he would make his case against the Iraqi leader in an address to the U.N. General Assembly Sept. 12, the day after the one-year anniversary of the worst terrorist attack against the United States.

"The last time the U.S. went to war with Iraq, the S&P dropped by 10 percent, the Dow by 10 percent," Mike Thompson, market strategist with RiskMetrics, told CNNfn's Market Call. "This issue is an artificial injection into the economic scenario that is hopefully a one-time affair. But it creates a lot of turbulence and sends people running for cover."

Technology stocks also recouped losses despite a warning from chipmaker National Semiconductor and more lowered earnings forecasts for tech bellwether Intel.

The Dow Jones industrial average gained 117.07 points to 8,425.12, rebounding from Tuesday's dramatic selloff. The Nasdaq composite added 28.47, or 2.3 percent, to 1,292.31. The Standard & Poor's 500 index rose 15.38 to 893.40.

"Concerns remain that the economic data indicate the economy could slip back into a recession," said Peter Cardillo, director of research with Global Partners Securities. "Looking at technology, the fears are back in the market that third-quarter earnings may not live up to expectations."

On tap for Thursday is the July factory orders number, expected to see a strong surge from the prior month on the back of solid growth in July durable goods orders. Also on the docket: August sales results from the nation's retailers.

U.S. automaker General Motors (GM: up $0.20 to $45.75, Research, Estimates) raised its earnings guidance for both the third quarter and full year after posting strong U.S. sales for August.

But tobacco marketer Philip Morris (MO: down $1.71 to $47.80, Research, Estimates) dragged on the blue-chip index, emerging as the biggest loser. The top U.S. cigarette maker said it may introduce a product with reduced health risk next year in an effort to counter increased competitive pressure from discount cigarettes that are eroding the company's market share.

Aerospace firm Boeing (BA: up $1.39 to $36.85, Research, Estimates) and defense contractor General Dynamics (GD: up $1.30 to $75.87, Research, Estimates) said Tuesday the U.S. Navy had given them 30 days to pay $2.3 billion to settle an 11-year legal battle over the Pentagon's cancellation of the Navy's A-12 fighter jet.

Among other Dow gainers were shares of consumer products maker Procter & Gamble (PG: up $2.02 to $88.56, Research, Estimates), software maker Microsoft (MSFT: up $1.19 to $48.21, Research, Estimates), and telecom service provider SBC Communications (SBC: up $1.20 to $24.30, Research, Estimates).

In a midday earnings report, chipmaker National Semiconductor (NSM: up $0.23 to $15.20, Research, Estimates) posted a first-quarter profit of 1 cent a share, in line with expectations and compared with a loss of 31 cents a share a year earlier. But the company warned it expects second-quarter revenue to be down 5 percent sequentially, citing weakness in demand for the holiday season.

The news initially rocked an already shaky chip sector struggling with a deluge of bearish brokerage comments about Intel.

The saga continued for Intel (INTC: up $0.25 to $16.11, Research, Estimates) as both Merrill Lynch and Credit Suisse First Boston lowered their 2002 and 2003 earnings estimates a day after Lehman Brothers issued a bearish note on the No. 1 chipmaker's third-quarter revenue forecast.

"We also think that the Street's fourth-quarter 2002 expectation of 17 cents in earnings per share is unreasonably high," Merrill analyst Joseph Osha said in a morning research note.

Intel's mid-quarter update is scheduled for Thursday.

A warning from chipmaker Fairchild Semiconductor (FCS: up $0.11 to $10.60, Research, Estimates) faced off with some much-needed positive news for techs, delivered by custom chipmaker LSI Logic (LSI: up $0.74 to $7.70, Research, Estimates).

Fairchild warned that it sees third-quarter revenue coming in flat to slightly down from the second quarter, citing slow orders in its computing and consumer segments. The company also said it was cautious about its guidance for the fourth quarter. Meanwhile, LSI Logic reiterated its third-quarter revenue guidance, saying it anticipates an increase from the second quarter on strength in its semiconductor components businesses.

Semiconductor equipment issues, including KLA-Tencor (KLAC: up $0.24 to $31.40, Research, Estimates), Novellus Systems (NVLS: up $0.75 to $23.70, Research, Estimates) and Lam Research (LRCX: up $0.08 to $11.04, Research, Estimates), rose after being down earlier in the day.

Qualcomm (QCOM: up $0.23 to $27.12, Research, Estimates), the provider of wireless communications products, said at the Salomon Smith Barney technology conference that its phone chip shipments could see an uptick in the current and sequential quarter, according to news reports. Also speaking at the conference, Texas Instruments (TXN: up $0.66 to $19.18, Research, Estimates) CEO reaffirmed the semiconductor maker's third-quarter outlook.

The latest update on construction spending didn't disappoint investors, who have been concerned about the economy. The government said construction spending was unchanged in July, a stronger showing than the 0.4 percent decline expected by economists surveyed by Briefing.com. The June drop was revised to 1.7 percent from the originally reported 2.2 percent.

European markets held on to gains to close mostly higher, while Tokyo's Nikkei index finished at a fresh 19-year low in a decline for most Asian-Pacific markets.

Treasury prices were up slightly, with the 10-year note yield at 3.96 percent. The dollar strengthened against the yen and euro. Light crude oil futures rose 48 cents to $28.27 a barrel in U.S. trading.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners 2-to-1 as 1.3 billion shares traded. On the Nasdaq, winners topped losers as 1.4 billion shares changed hands.