US blue chips rallied to their highest levels in nearly two years on Wednesday, after solid earnings from several big financial services companies raised investors' hopes for more positive results in the coming weeks. But weakness in semiconductor stocks kept a lid on the technology-heavy Nasdaq.
The major market gauges have rallied since last March, as robust economic data and corporate profits have underscored a strong economic recovery.
Still, many analysts have voiced concerns that stock prices, particularly many red-hot technology issues, have already priced in positive news about earnings and the economy.
Several leading tech companies have sold off in recent sessions, even after they reported strong earnings but failed to deliver forecasts bullish enough to impress investors.
Shares of some tech companies that reported earnings after the close jumped in late-hours trading.
EBay Inc shares surged to $66.81 on Instinet from their Nasdaq close of $64.38, after the online auctioneer said its quarterly earnings rose nearly 64 percent, fuelled by strong holiday sales.
Xilinx Inc shares shot up to $43.10 on Instinet from their Nasdaq close of $40.39, after the company swung to a quarterly profit from a year-ago loss, driven by the economic recovery and sharply higher sales.
But SanDisk Corp shares sank after the close, even after the company posted sharply higher quarterly earnings.
SanDisk slid to $63.53 on Instinet from its Nasdaq close of $69.59.
The company, which makes memory cards used in digital cameras and MP3 players, said average prices will drop moderately in the year's first half. Price declines in the year's second half will reflect new increases in capacity in the flash memory market.
"People will sell and you'll get maybe half a day's worth of a down market before buyers come in. But there's too much new money coming into equities and a lack of follow-through on the sell side," said Tim Heekin, director of trading at Thomas Weisel Partners in San Francisco.
"We haven't seen any big earnings misses yet, and people are comfortable about interest rates and where the dollar is," Heekin said. "The fundamental economic figures still look OK."
The Dow Jones industrial average climbed 94.96 points, or 0.90 percent, to 10,623.62, its highest finish since mid-March 2002.
The broader Standard & Poor's 500 Index added 8.85 points, or 0.78 percent, to 1,147.62, its highest close since March 2002.
The Nasdaq Composite Index eased 5.53 points, or 0.26 percent, to 2,142.45.
Volume was heavy, with roughly 1.76 billion shares changing hands on the New York Stock Exchange, and about 2.4 billion shares traded on the Nasdaq.
Advancers beat decliners by a ratio of about 21 to 12 on the NYSE, while decliners narrowly beat gainers on the Nasdaq by a ratio of 17 to 15.
Advanced Micro Devices Inc cast a pall on the semiconductor sector, even after the company posted its first quarterly net profit in more than two years, easily beating Wall Street's expectations.
Shares of AMD, the No 2 microprocessor maker after Intel Corp, sank $1.48, or 8.5 percent, to $15.90, dragging down the Philadelphia Stock Exchange semiconductor index which fell 2.6 percent.
J.P. Morgan Chase & Co bolstered the Dow, after it posted quarterly earnings that blew past analysts' forecasts, reversing a year-ago loss, helped by a jump in investment banking profits and fewer bad loans.
Shares of J.P. Morgan, the No 2 US bank that agreed last week to buy Bank One Corp, advanced $1.01, or 2.6 percent, to $40.10. J.P. Morgan was the blue-chip Dow's top percentage gainer.
Bank One's stock gained $1.26 or 2.5 percent to $52.13.
Shares of Fannie Mae also rose, after it said its quarterly profit more than doubled, as low interest rates fuelled mortgage growth and losses on its interest-rate hedges fell. Fannie Mae, the biggest buyer of US mortgages, gained $2.67, or 3.7 percent, to $75.67.
Lucent Technologies Inc topped the New York Stock Exchange's most actively traded list, after it posted its second straight quarterly profit.
Shares of Lucent, one of the world's largest makers of telecommunications equipment, fell 33 cents, or almost 7 percent, to $4.42.
Though Lucent's results beat analysts' estimates and the company also forecast a full-year profit excluding charges, analysts said its shares fell on disappointment it did not raise its revenue outlook for the 2004 fiscal year.
In economic news, the government said US builders broke ground on new homes at a faster-than-expected pace last month, ending the best year for housing since 1978 on an upbeat note.
December housing starts rose 1.7 percent to a seasonally adjusted annual rate of 2.088 million units, the quickest pace since February 1984, the Commerce Department said.
The gain defied Wall Street's forecasts for a decline. But financial markets showed little initial reaction.
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