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Good News Sends Stocks Skyward

Both the Dow Industrials and Nasdaq snapped a three-day losing streak and ended with respectable gains Wednesday as buying intensified late in the session following a morning of lethargic trading.

The Dow was buoyed by a strong showing in its drug, entertainment and tobacco components. Techs, which traded in a choppy fashion for most of the session, saw buyers surface primarily in the Internet and chip segments. Even the networking sector made a push into the plus column after spending most of the day in the red on the wings of downgrades in the group.

Â"The FedÂ's aggressive rate cuts have just made people more sanguine,Â" noted Steve Massocca, head of trading and president of Pacific Growth Equities. And while the market will continue to witness pullbacks and seesaw action, he believes investorsÂ' bias is much healthier. Â"People had been expecting the worst and whenever thereÂ's a positive development, stocks rally.Â"

In the broad market, biotech, insurance, drug, retail, oil, oil service and consumer shares ascended while gold, chemical and airline shares slumped.

The Dow Jones Industrial Average sprinted 170 points, or 1.6 percent, to 10,625.

Â"The market is drifting after taking in the first batch of earnings releases, [which contained] something for both the bears and the bulls,Â" said Mike Sheldon, chief market strategist at Spencer Clarke.

Â"As we get into the second half of the year, investors will look to a rebound in the economy. I believe the inventory correction is well underway and that consumer confidence has stabilized - those are things to be optimistic about. I think weÂ'll have more of a broad-based recovery, which will differentiate this market from the one of the late 1990s,Â" Sheldon added.

The DowÂ's frontrunners Wednesday included Walt Disney, Philip Morris, Honeywell, General Electric, Caterpillar and Microsoft. Ending lower were shares of AT&T, Boeing and Hewlett-Packard.

The Nasdaq Composite ascended 43 points, or 2.1 percent, to 2,059 while the Nasdaq 100 Index swelled 51 points, or 2.9 percent, to 1,814.

The market got a dose of positive economic news, suggesting that the economy isnÂ't exactly rolling over. March new home sales rose 4.2 percent to a record 1.021 million rate vs. expectations of a 911,000 level. March existing home sales climbed 4.8 percent to a 5.44 million rate vs. the expected 5.14 million level.

Â"Remember that recession all the members of the Fed have been fretting about? Well, it has not been seen in the housing market. Indeed, it really looks as if Wall Street and Main Street have gone their separate way, something the members of the FOMC may have to take note of sometime soon,Â" commented Joel Naroff, chief U.S. economist at Naroff Economic Advisors.

Â"As long as the demand for homes remans strong, there is little reason to believe that the economy is tanking. Indeed, there is a lot of pent-up demand for housing related expenditures that should occur as we move through the year. That provides some real optimism that consumer spending will not only hold up, but could easily accelerate during the second half,Â" Naroff concluded.

In other economic news, March durable goods orders rose 3 percent, greater than the 1 percent advance that had been expected. But excluding defense, durable goods orders rose 0.9 percent and excluding transportation they slipped 1.8 percent. See full story and view Economic Preview and economic calendar and forecasts.

Â"The rise in the headline reflects a 21.4 percent rise in transportation orders -- we had expected a 15 percent rise—mostly civilian aircraft [as] Boeing reported 55 new orders in March, compared to just 17 in February,Â" commented Ian Shepherdson, chief U.S. economist at High Frequency Economics.

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