Bulls Seize Upper Hand

Bank and chip shares help drive a broad stock market advance.
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Updated from 4:02 p.m. EST

Bulls roared back Thursday as solid tech earnings and a normalizing yield curve sparked a rally in bank and semiconductor shares.

The

Dow Jones Industrial Average

closed up 99.73 points, or 0.93%, to 10,809.47, putting the index back into positive territory for the year. The

S&P 500

rose 9.15 points, or 0.72%, to 1273.83. The

Nasdaq Composite

gained 22.35 points, or 0.99%, to 2283.

"After our selling climax on Friday, we've had a couple pretty good days that brought in cash aggressively off the sidelines," said Al Goldman, chief market strategist with AG Edwards. "This market is just acting better because of its own internal devices, not because of any specific development. There's good value and money coming in, which is impressive."

About 2.07 billion shares traded on the

New York Stock Exchange

, with advancers beating decliners by a 2-to-1 margin. Trading volume on the Nasdaq was 2.46 billion shares, with advancers outpacing decliners 2 to 1.

The 10-year Treasury bond was down 9/32 in price to yield 4.51%, 4 basis points above the two-year note. The so-called "steepening" of the yield curve, in which long-dated interest rates exceed shorter ones, fattens lending spreads and sent the KBW Bank Index up 1.6%.

"A significant portion of bond moves has been technical in nature," said John Canavan, market analyst with Stone & McCarthy Research Associates. "Treasuries haven't done anything between December until now and, with stronger economic data, we're seeing a steepening. With the

FOMC

meeting and hopefully a strong non-farm payrolls report looming, the question will be if things can stem the bleeding."

Chip stocks were another source of strength, with the Philadelphia Semiconductor Index rising 2.9%. All of its 19 components finished the session in positive territory.

Oil ticked higher after falling more than $2 a barrel in the previous two sessions. In Nymex floor trading, March crude finished up 41 cents to $66.26 a barrel. The contract slid $1.21 a barrel on Wednesday as an Energy Department report showed a decline in crude inventories offset by builds in gasoline and distillates.

"We had good earnings and good economic news this morning," said Peter Cardillo, chief market analyst with SW Bach & Co. "Iran is showing resolve to end things in a peaceful manner, so the end of geopolitical problems is easing fears."

Stocks fell Wednesday as a crush of earnings and mergers news left investors fatigued. The S&P 500 lost 2 points to 1265. At the close Thursday, the broad index has made up 13 of the 24 points it lost in last Friday's 2% selloff. The Nasdaq has retaken 35 of the 54 points it lost in the Friday rout.

Thursday was another huge earnings day, with five Dow components reporting, including

General Motors

(GM) - Get Report

, which last night saw investor Kirk Kerkorian add 12 million shares to his ownership stake.

GM reported a fourth-quarter loss of $4.8 billion, or $8.45 a share, compared with a loss of $99 million, or 18 cents a share, last year. Excluding items, GM lost $1.2 billion, or $2.09 a share, badly missing estimates. Shares slipped 80 cents, or 3.4%, to close at $23.05.

To view Gregg Greenberg's video take of the market, click here

.

Caterpillar

(CAT) - Get Report

said it earned $846 million, or $1.20 a share, in the fourth quarter, up from $551 million, or 77 cents a share, a year ago. Sales increased 12% to $9.66 billion. Analysts were expecting $1.10 a share on sales of $9.14 billion. Caterpillar gained $3.10, or 5%, to $65.17.

Honeywell

(HON) - Get Report

reported fourth-quarter earnings of $520 million, or 62 cents a share, doubling year-ago earnings of $253 million, or 30 cents a share. Earnings from continuing operations were $511 million, or 61 cents a share, missing the consensus target by a penny. Sales rose to $7.28 billion from $6.64 billion a year earlier, beating analysts' expectations. Honeywell shares added $1.35, or 3.7%, to $37.41.

Verizon

(VZ) - Get Report

posted fourth-quarter earnings of $1.7 billion, or 59 cents a share, down from $3 billion, or $1.08 a share, a year ago. Excluding items, earnings were 64 cents a share, matching the Thomson First Call consensus. Revenue rose 5.8% to $19.33 billion. Verizon said it expects pension and other costs to cut full-year earnings by 34 cents to 36 cents a share. Verizon was higher by 30 cents, or 1%, to $31.68.

In its first report since merging with SBC Communications,

AT&T

(T) - Get Report

posted a fourth-quarter profit of $1.66 billion, or 46 cents a share, up from $688 million, or 21 cents a share, a year earlier. Revenue jumped 26% to $12.97 billion. Excluding items, the company earned 48 cents a share, beating the consensus by 3 cents. AT&T rose 31 cents, or 1.2%, to $25.52.

Eli Lilly

(LLY) - Get Report

reported a fourth-quarter profit of $700.6 million, or 64 cents a share, on a 6% revenue rise to $3.88 billion. Adjusted earnings of 80 cents a share were 4 cents ahead of estimates. Eli Lilly was down 24 cents, or 0.4%, to close at $56.93.

Amgen

(AMGN) - Get Report

reported fourth-quarter earnings of $824 million, or 66 cents a share, up from $689 million, or 53 cents a share, a year ago. Excluding items, Amgen had adjusted earnings of 75 cents a share, a penny below the consensus. Revenue rose 12% to $3.3 billion. Shares dropped $3.57, or 4.7%, to $71.90.

Nokia's

(NOK) - Get Report

fourth-quarter earnings fell about 1% from a year ago to $1.3 billion, matching estimates despite continuing margin deterioration reflecting sales in developing markets. Nokia lost 29 cents, or 1.6%, to $18.20.

Equities also grabbed inspiration Thursday from a plethora of second-tier technology firms that posted better-than-expected earnings Wednesday night, including

Novellus

(NVLS)

, which reported adjusted fourth-quarter earnings of 20 cents a share, 4 cents ahead of estimates. Novellus climbed $1.96, or 7%, to $29.88.

Conexant

(CNXT) - Get Report

said first-quarter sales rose 64% from a year ago, while adjusted earnings of 2 cents a share beat estimates by a penny. Shares jumped by 22 cents, or 6.7%, to $3.49.

Altera

(ALTR) - Get Report

said fourth-quarter earnings rose 20% to $69.7 million, or 19 cents a share, matching estimates. Revenue of $281.9 million roughly matched estimates. Altera added 57 cents, or 3%, to $19.49.

Other companies reporting strong quarters were

Sanmina

(SANM) - Get Report

,

Komag

(KOMG)

and

LSI Logic

(LSI) - Get Report

.

Marathon Oil

(MRO) - Get Report

reported fourth-quarter net income of $1.27 billion, or $3.43 a share, nearly tripling last year's results Excluding items, Marathon would have earned $1.33 billion, or $3.61 a share, handily beating analysts expectations of $3.02 a share, according to Thomson First Call. Marathon rose 64 cents, or 0.9%, to $72.60.

After the bell Thursday,

Microsoft

(MSFT) - Get Report

posted fiscal second-quarter earnings of $3.65 billion, or 34 cents a share, up from $3.46 billion, or 32 cents a share, a year ago. Revenue increased 9.4% to $11.84 billion from last year. The Thomson First Call consensus was for EPS of 33 cents on revenue of $11.96 billion. Microsoft finished up 10 cents, or 0.4%, to $26.50 and was trading up 1.5% in the after-hours session.

In addition to the government's advanced reading on fourth-quarter GDP, earnings reports are expected from

Chevron

(CVX) - Get Report

,

Procter & Gamble

(PG) - Get Report

and

Nucor

(NUE) - Get Report

. Economists expect that GDP rose 2.8% in the fourth quarter after a previous 4.1% gain.

On the economic front, the Commerce Department said durable goods orders for December rose 1.3%, higher than expectations of a 1% gain. Excluding transportation, orders were up 0.9%, in line with expectations. November's headline number was revised to a gain of 5.4% from 4.4% previously reported.

"Overall, this is a very robust report," said Ian Shepherdson, chief economist with High Frequency Economics. "There was a big upward revision to November orders excluding transportation, to a gain of 0.6% from down 0.6%."

Elsewhere, the Labor Department said initial jobless claims rose by 11,000 in the week ended Jan. 21 to 283,000, below expectations. The four-week moving average fell by 10,750 to 288,750.

By sector, the Philadelphia Housing Sector index was up 1.3%, the Philadelphia Oil Service Sector index gained 1% and the Amex Airline index was down 0.7%.

Overseas markets were mostly higher, with London's FTSE 100 rising 0.2% to 5717 and Germany's Xetra DAX surging 2.2% to 5548. In Asia, Japan's Nikkei rose 1.5% overnight to 15,891, while Hong Kong's Hang Seng was little changed at 15,520.