Updated from 4:02 p.m. EST

Stocks closed just shy of their recent highs following a late afternoon surge Wednesday, capping a strong day of trading. Tech issues led the charge.

The

Dow Jones Industrial Average

finished up 111.04 points, or 1.1%, to 9848.83, the

S&P 500

rose 11.48 points, or 1.1%, to 1058.05, while the

Nasdaq Composite

surged 36.07 points, or 1.9%, to 1966.82.

All three indices moved within points of the multimonth highs achieved last week. The Nasdaq closed at a 21-month high of 1976.37 on Nov. 6. And on Nov. 3, the Dow and S&P closed at 17-month highs of 9858.46 and 1059.02, respectively.

Volume on the

New York Stock Exchange

was 1.33 billion shares, while 1.83 billion shares exchanged hands on the Nasdaq.

A confluence of factors drove the markets higher and higher as the closing bell approached. Short-covering, bargain hunting and positive comments on the economy from both

General Electric

(GE) - Get Report

CEO Jeffrey Immelt and

IBM

(IBM) - Get Report

CEO Samuel Palmisano all contributed to the late surge, according to market experts.

"With practically no economic data in the last few days, the bears tried to move the markets down," said Ken Tower, CyberTrader's chief market strategist. "I suspect that many covered their shorts this afternoon, and a lot of managers who had been sitting with cash on their hands put new money to work," trying to catch the rally.

"With five of the past six days down, the market overdid it," said Arthur Hogan, chief market analyst for Jefferies, "not necessarily on negativity, but definitely too far down too fast in the short term."

Encouraged by strong demand for a new five-year Treasury bond, the 10-year was up 12/32, its yield falling to 4.40%. The dollar was down sharply vs. the euro but strengthened slightly against the Japanese yen. Currency traders will keep their eyes on September trade balance figures due out tomorrow. Economists expect the U.S. deficit to widen to $40.5 billion from $39.2 billion last month. Meanwhile, gold futures were up 1.8% to $395.00 per ounce, on track to challenge their seven-year closing high.

Applied Materials

(AMAT) - Get Report

shares rose 54 cents, or 2.2%, to $25.44, before reporting third-quarter earnings per share of 6 cents after the closing bell, down from 9 cents last year. The Street had expected the semiconductor-equipment bellwether's earnings to fall to 5 cents. The sector also had a strong day, with the Philadelphia Semiconductor index up 3.4%.

S&P downgraded

Ford's

(F) - Get Report

credit rating to triple-B-minus, one notch above junk status. The downgrade was expected, but investors breathed a sigh of relief that S&P moved Ford's outlook to stable. The company's shares rose 75 cents, or 6.1%, to $13.06 in trading volume nearly quadruple the daily average.

On the earnings front,

Federated Department Stores

(FD)

, which operates Bloomingdale's and Macy's, said it earned 36 cents a share in the third quarter, down slightly from 38 cents a year ago, and a penny above analysts' expectations. Federated shares fell 52 cents, or 1%, to $49.65.

Computer Sciences

(CSC)

earned 57 cents per share in the third quarter, and increased revenue by nearly one-third on increased sales to the federal government. In addition, Prudential upgraded the stock from neutral to overweight, pushing the stock up $3.40, or 8.3%, to $44.19.

Merck

(MRK) - Get Report

announced it will cancel clinical trials of its experimental Substance P, after determining it was ineffective in treating depression. Nonetheless, shares of the company were up 38 cents, or 0.9%, to $44.25, buoyed by a Prudential upgrade to overweight from underweight.

VaxGen

(VXGN)

became the latest

biotech to disappoint investors, falling 46 cents, or 4.7%, to $9.39 after the company announced disappointing results in a phase III trial of its HIV vaccine in Thailand. Although the sector had a solid day, the

Nasdaq Biotech

index rose 3.7%.

Microsoft

(MSFT) - Get Report

began three days of hearings before European Union regulators over lingering antitrust issues. Microsoft shares improved 18 cents, or 0.7%, to $25.98.

Shares of

EchoStar

(DISH) - Get Report

rallied $1.09, or 3.4%, to $33.14. Bank of America also announced that it selected the company as a top pick, after the shares were stung for a 12.9% decline Monday following its disappointing quarterly results.

Nokia

(NOK) - Get Report

was upgraded to buy by Smith Barney. The company's shares were up 66 cents, or 3.9%, to $17.74.

Overseas markets finished mixed on Wednesday, with London's FTSE up 0.6% to 4371 and Germany's Xetra DAX up 0.5% to 3748. In Asia, the Nikkei rose 0.2% to 10,226, and Hong Kong's Hang Seng fell 0.3% to 11,971.

On Tuesday, the Dow closed down 18.74 points, or 0.2%, to 9737.79, while the Nasdaq fell 10.89 points, or 0.6%, to 1930.75. The S&P 500 fell fractionally to 1046.57.

Tomorrow, some of the nation's largest retailers, including

Wal-Mart

(WMT) - Get Report

, Target and

Kohl's

(KSS) - Get Report

will all report third-quarter earnings. On Friday, October retail sales will be released and is expected to fall 0.2% over the month.

In addition, tech bellwether

Dell

(DELL) - Get Report

will release earnings after tomorrow's close. The company's earnings are expected to rise to 26 cents per share in the third quarter, from 21 cents last year.