Stocks continued to climb in a rally sparked by a surprisingly strong earnings report by Intel, and several other tech and manufacturing companies delivered solid results.
Among Dow components, Intel, United Technologies and Microsoft advanced, while JPMorgan slipped.
The S&P 500 and the Nasdaq also rose sharply. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 15.
All key S&P 500 sectors gained, led by technology, energy and consumer discretionary.
The market continues to wrestle with two simple things: cautious optimism around the recovery and uncertainty over the direction of monetary and fiscal policy, said Doug Godine, head of equities at Signal Hill Capital.
The signs of a good recovery, and not an overheated one, are evident in strong corporate balance sheets and in reasonable expectations by corporations, Godine said.
That good news, reflected in Wednesday's rally, is tempered by the lack of clarity over the future direction of monetary and fiscal policy as Congress and Obama wrestle over the budget, he added.
"What is going to be our stance on debt ceilings? What will be our stance on budget cuts? "Where will this shake out in terms of budget bill?" Godine asked. "At some point we’re going to have to figure out what our long-term monetary policy is."
Investors cheered earnings as they showed companies are benefiting from growing global demand for goods and services. Manufacturers United Technologies and Eaton, for instance, reported better-than-expected results before the market opened Tuesday as global demand for their products rose. Both manufacturers also raised their full-year earnings forecasts.
And AT&T fell despite delivering earnings of 57 cents a share, in line with expectations. The results showed the wireless phone company continued to grow despite the loss of exclusive U.S. rights to Apple's iPhone. AT&T's first quarter net income rose to $3.4 billion from $2.5 billion a year ago.
Wells Fargo also fell Wednesday despite a 51 percent jump in first-quarter income.
The surge in the markets began after Intel released a suprisingly strong reporton Tuesday, soundly beating forecasts with earnings of 59 cents a share on revenues of $12.85 billion, up from 43 cents on revenues of $10.3 billion a year ago.
Analysts had expected Intel to post earnings of 46 cents on revenue of $11.59 billion, according to Thomson Reuters. At least six brokerages boosted their price target for the firm after the results, pushing the stock up more than 6 percent on high volume.
The fact that Intel doesn't expect to be hurt by supply constraints due to the multiple disasters in Japan was also good news to investors, Godine at Signal Hill said.
The news boosted the entire semiconductor sector. The PHLX Semiconductor Sector Index rose more than 3 percent Wednesday.
IBM and Yahoo also released results after the market closed Tuesday. IBM slipped after reporting earnings better than forecasted, but the tech giant disappointed investors as new business in its global services division fell.
Yahoo , however, jumped after beating forecastswith first-quarter earnings of 17 cents a share, although that was down from 22 cents a year ago. Analysts had expected the search company to post earnings of 16 cents a share, according to Thomson Reuters.
Cree sank after reporting a 58 percent drop in earnings after the bell Tuesday, followed by several downgrades by stock analysts. The maker of LED products suffered from price cuts.
Meanwhile, Goldman gained more than 1 percent after JMP Securities said investors should "back up the truck and buy GS shares" in a note to clients. Goldman shares suffered Tuesday despite delivering better-than-expected results. JMP raised its price target for the investment bank to $198 a share from $183. "There are indeed a few areas of concern, but we believe these to be either manageable or completely overblown," JMP Securities said.
CSX advanced after reporting a 30 percent gain in first-quarter earnings as demand and rising prices for shipping offset higher fuel costs. The railroad firm earned $395 million $1.06 a share, up from $305 million or 78 cents a share a year ago.