The tech heavy Nasdaq composite index gained as much as 90 points before retreating back to close up just 7.34 at 2,340.12. The Standard & Poor's 500 index climbed 10.12 to 1,274.86.
The Dow Jones industrial average rose 168.36, or about 2 percent, to 10,487.29 led by Wal-Mart, which rose $2.81 to $51.75.
Many experts say that the market was whipsawed Thursday by overly bullish bargain hunters and overly bearish pessimists. Tony Cecin, head of trading at U.S Bancorp Piper Jaffray, called the Nasdaq's earlier surge "a reflex rally from a gut wrenching over reaction."
But the bears have largely dominated the markets in the past week--especially the tech-heavy Nasdaq. It slid about 11 percent in the first three days of this week, capped by Wednesday's 7 percent slide to a 52-week low on near record-breaking volume. Wall Street hadn't seen the Nasdaq so low since the summer of 1999, falling 54.6 percent since its all-time high March 10.
Cecin believes that bargain-hunting portfolio managers moved some of the piles of cash sitting safely in money market funds into the volatile markets. Investors "know they can't buy everything at the bottom," he said.
The Investment Company Institute, a mutual fund trade group, reported that cash sitting in taxable money market funds increased to $1.54 trillion in October, up almost 2 percent from September, when it was $1.51 trillion. At the same time, investors pulled money out of stock funds. The value of stock funds fell about 3 percent in October to $4.29 trillion from the previous month's level of nearly $4.4 trillion.
Yet concerns over the economy and earnings were never far from investors' thoughts. The Index of Investor Optimism compiled by PaineWebber indicates low levels of optimism not seen since June of 1997.
"There really hasn't been any good news for a long time," said Michael Palazzi, head of Nasdaq trading at CIBC World Markets.
Investors expressed less optimism about the prospects for economic growth during the next 12 months. Only 46 percent of the 1,010 people surveyed in the December Index of Investor Optimism reported they are somewhat or very optimistic, compared with 59 percent in November.
But investors did detect some positive vibes in Cisco Systems, at least for a day. After a rough Wednesday, Cisco helped keep the Nasdaq afloat, closing up $2.38 at $38.88. Intel also gained $1.19 to $33.13; Microsoft advanced $1.94 to $43.44; and Oracle climbed $1 to $29.50.
But telecom companies announced gloomy earnings forecasts, which dampened the mood.
Lucent Technologies fell $1.31, or 8 percent, to $14.19. The telecom equipment maker said Thursday it expects a fiscal first-quarter loss of between 25 cents a share and 30 cents a share. Wall Street was expecting a loss of a penny a share for its first quarter, ending Dec. 31, according to First Call.
The company also restated its fourth-quarter results because of revenue recognition issues and said it would restructure to save $1 billion.
AT&T lowered its fourth-quarter earnings and revenue targets again Wednesday, citing lower-than-expected revenue growth from its consumer and business long-distance services.
The company said revenue growth in the quarter will be 2.5 percent to 3 percent, down from an already lowered projection of 4 percent to 5 percent. AT&T previously lowered projections after its third-quarter earnings. Shares of Ma Bell fell $1.88, or almost 10 percent, to $17.06.
Of the 18 sectors tracked by CNET Investor, network equipment makers were the day's largest gainers, climbing 4 percent. PC hardware makers posted the sharpest drops, falling almost 4 percent.
The CNET tech index inched up 1.79 to 1,930.17. Losers edged out winners, with 55 of the 97 stocks in the index falling, 41 rising, and one remaining unchanged.
RealNetworks shares also caught the earnings flu. The maker of Internet media software said its fourth-quarter earnings will be about 2 cents a share. Wall Street expected the company to post earnings of 4 cents a share, the consensus estimate of analysts polled by First Call. The company, whose shares fell $4.38, or 44 percent, to $5.56, attributed the shortfall to slowing online advertising sales.
Palm announced earnings Wednesday night that squeaked past fiscal second-quarter expectations Wednesday, but skeptical investors still punished the stock, which closed down $12.50, or nearly 33 percent, at $25.62 on Thursday.
Excluding amortization and other charges, the maker of handheld computers reported net income of $27.5 million, or 5 cents per share, on sales of $522.2 million. Analysts had been expecting Palm to report earnings of 4 cents per share on sales of about $500 million. Including the charges, the company earned $20.3 million, or 4 cents per share.
Investors also pummeled shares of Conexant Systems, sending the stock down $6.38, or 31 percent, to $14. The chipmaker said it expects a fiscal first-quarter loss, excluding one-time charges, of 5 cents a share to 10 cents a share. Wall Street expected the company to earn 11 cents, the consensus estimate of analysts surveyed by First Call.
Chipmaker Micron Technology missed Wall Street expectations late Wednesday, blaming the shortfall on "declining market conditions."
After market close, the company reported net income of $352 million, or 58 cents per share, for its fiscal first quarter of 2001. A consensus of analysts expected the company to earn 60 cents per share, according to First Call. That compares with $341 million, or 60 cents per share, the same quarter last year. Micron rose $1.13 to $30.94 on Thursday.
Chip stocks finished lower. The Philadelphia semiconductor index fell 4.17 to 535.40 led by LSI Logic, which fell $2.26, or 12 percent, to $16.43.
On the bright side, Qwest Communications International, a broadband communications company, said Thursday it expects to meet or beat analysts' estimates for its fourth-quarter earnings because of strong demand for its products and services. Shares of Qwest rose $4.63, or 14 percent, to $37.
Great Plains Software also had reasons to smile. Microsoft said it will buy the maker of business-management software for about $1.1 billion in stock. Each share of Great Plains will be exchanged for 1.1 shares of Microsoft. Great Plains rose $11.25, or about 32 percent, to $46.56.