Updated from 4:04 p.m. EST

The Nasdaq shot to a five-year high Wednesday as positive research on Sun Microsystems ( SUNW) and rebounding semiconductor shares helped reverse the prior day's Fed-related battering.

"The absence of economic news has given investors a day to re-evaluate what was said by the Fed," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "The market still remains strong, and confidence seems high."

Tech led the charge, with the Nasdaq rising 33.32 points, or 1.45%, to 2337.78. Sun tacked on a 4.4% gain after Morgan Stanley predicted the hardware maker would return to profitability this year. A 2.5% rise in the Philadelphia semiconductor index contributed to the gains.

Another source of strength were online financial stocks after Ameritrade ( AMTD) raised earnings guidance for its second quarter. The stock finished up 9.4%, while Schwab ( SCHW) gained 2.1% and E*Trade ( ET) rose 4.8%.

Meanwhile, the Dow Jones Industrial Average rose 61.16 points, or 0.55%, to 11,215.70, and the S&P 500 gained 9.66 points, or 0.75%, to 1302.89. General Motors ( GM) pressured blue chips after the automaker used a regulatory filing on Tuesday to expand on the scope of its earnings restatement, saying its accounting woes extend into GMAC, the financing arm that has been up for sale all year.

GM said it will restate results at GMAC for three years ending in the third quarter of 2005 to correct the misclassification of certain mortgage loans. The automaker also said it isn't sure it will be able to sell GMAC, or how much money it could get for the unit if a buyer steps up. GM fell 60 cents, or 2.6%, to close at $22.15.

The Dow was supported by gains of 2% or greater in Boeing ( BA), Walt Disney ( DIS) and Hewlett-Packard ( HPQ).

"Strength was concentrated in technology although all 10 S&P 500 sectors finished with gains," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "This all came despite a decline in bond prices and a second straight rise in oil prices."

Wednesday's action helped ease nerves frayed a day earlier when the Federal Open Market Committee raised official interest rates by a quarter-point to 4.75% on Tuesday, the highest level since April 2001. The central bank has now carried out 15 consecutive hikes in an effort to keep inflation from torpedoing a three-year-old economic recovery that has coincided with a 47% rally on the S&P 500.

For investors, the key question remains how many more times the Fed will tighten. Language retained in Tuesday's policy statement virtually ensures another quarter-point hike when the bank next convenes May 10. Beyond that, the jury is out, as the Fed's economic assessment seemed ambivalent.

To view Gregg Greenberg's video take on today's market, click here .

"As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained," the Fed wrote. "Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures."

Fed funds futures currently place 100% odds on a move to 5% at the May 10 meeting. Following that, there's a roughly 25% chance of a move to 5.25% in June -- although the odds for 5.25% go to about 50% by August.

On Wednesday, the 10-year Treasury bond was down 5/32 in price to yield 4.80%, while the dollar fell against the yen and the euro.

"The yield on the 10-year Treasury note rose to its highest level since June 2004," said Ken Tower, chief market strategist with CyberTrader. "Even the mighty 30-year bond yield rose to a four-month high. The uptrends in these two yield charts appear very strong. Investor patience seems to be running out after Ben Bernanke's first meeting, which appeared to confirm the status quo."

"Those very short-term support levels were broken yesterday, but the supports under the current levels are substantial," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Now that the Fed has made it clear that we will see one if not two more rate hikes, the uncertainty has been removed. We expect the focus to shift to first-quarter earnings results, and they are expected to be good."

Also pressuring stocks Tuesday was a rally in oil futures, where speculative hedge fund trading has exacerbated moves that reflect concerns about worldwide supply constrictions. May crude added 3% to $66.07 a barrel Tuesday. In Nymex floor trading Wednesday, the front-month contract rose 38 cents to close at $66.45 a barrel.

The Energy Department's weekly update on U.S. storage inventories showed a higher-than-expected, 2.1 million-barrel rise in crude stocks. Gasoline inventories fell 5.4 million barrels, the fourth straight weekly decline and the biggest drop since August 2003. Distillate stocks fell 2.5 million barrels.

Also influencing Wednesday's market were expectations about two big economic reports later this week. On Thursday, the Commerce Department is expected to raise its estimate of fourth-quarter economic growth to 1.7% from 1.6% in its final revision to gross domestic product. On Friday, it is expected to say that personal income rose 0.4% in February.

About 1.57 billion shares traded on the New York Stock Exchange, with advancers beating decliners by an 8-to-3 margin. Trading volume on the Nasdaq was 2.24 billion shares, and advancers outpaced decliners 7 to 3.

Among stocks, Microsoft ( MSFT) could face more problems with its new Vista operating system after the European Union warned that the company should not add search features, which would break antitrust laws.

A week earlier, the software giant moved back the release date of the consumer version of Vista to next January, not before Christmas as previously planned. Microsoft rose 12 cents, or 0.5%, to $27.02.

Red Hat's ( RHAT) fourth-quarter earnings doubled from a year ago to $27.3 million, or 13 cents a share, beating estimates by a penny. First-quarter guidance was slightly soft, however, and the shares lost 2.2% to close at $28.19.

Tibco's ( TIBX) first-quarter earnings fell 46% from a year ago to $5.6 million, or 3 cents a share, including a hefty expense for stock options. Adjusted earnings of 6 cents a share were a penny ahead of forecasts. The stock fell 26 cents, or 3.2%, to $7.94.

Shares of Accenture ( ACN) finished down 5.8% after the company took a $450 million charge to cover future losses related to a U.K. contract. Excluding the item, second-quarter earnings of 38 cents a share were better than expected. The stock was lower by $1.79 to $29.11.

Medical-device maker Guidant ( GDT) temporarily suspended its supply of the Xience V stent after it found quality issues with about 1% of the current inventory. The company said it would incur a first-quarter charge of roughly $15 million related to the suspension. Guidant ended down 40 cents, or 0.5%, at $78.

Qualcomm ( QCOM) said it has filed a lawsuit against Broadcom ( BRCM) for patent infringement in the manufacturing of chips used for wireless handsets.

Qualcomm added $1.36, or 2.8%, to $50.72. Broadcom tacked on $1.44, or 3.4%, to $43.77.

Merrill Lynch upped its rating for Dow component 3M ( MMM) to buy from neutral, saying the company will benefit from rapid international economic expansion. 3M was higher by $1.29, or 1.7%, to close at $77.59.

Meanwhile, another Dow component, Caterpillar ( CAT), ended the session lower after UBS downgraded the stock to neutral from buy. The firm cited decelerating market growth. Shares of Caterpillar fell $1.19, or 1.6%, to $73.68.

Overseas markets were mostly higher, with London's FTSE 100 adding 0.4% to 5959, and Germany's Xetra DAX up 0.4% at 5915. In Asia, Japan's Nikkei rose 1.5% overnight to 16,938, while Hong Kong's Hang Seng slipped 0.7% to 15,745.

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