Stocks closed higher on Wednesday as diminished tension in the Middle East set a positive tone for the major market indexes, which remained resilient despite lukewarm economic data.
"There was some follow through from the action earlier this week from home sales and falling oil prices," said Joe Ranieri, managing director of trading at Canaccord Adams. "As we went into the short week, I expected sideways trading with stocks up slightly so the market is behaving as it should."
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all closed at six-week highs, rising for the fifth straight session. Tech stocks were in focus on Wednesday after Wall Street analysts expressed optimism for software giant Microsoft and flash memory maker SanDisk.
The Canaccord Adams trader said he expects "more of the same" on Thursday, which will be the last trading day of the week since markets are closed on Good Friday. "You might get a little selloff but I wouldn't be surprised if it was an up day," he said.
The markets opened slightly higher after Iran said it would 15 detained British sailors, calling it a "gift" for Britain.
"The resolution between Iran and Britain took a dark cloud away, it's the best of all worlds," said Dan McMahon, head of listed trading at CIBC World Markets. "It's surprising that crude didn't sell off more."
Half of the 10 sectors in the S&P 500 closed higher with technology and health care stocks the top performers, while utilities and telecom stocks such as AT&T lagged the overall market. Breadth was slightly positive with advancing shares outpacing decliners by three to two on the NYSE.
The monthly ISM's services index hit its lowest level since April 2003, falling unexpectedly to 52.4, short of the consensus forecast of 55.0. February's factory orders rose 1%, less than economists were expecting.
"It's kind of a tug-of-war today in that you had the expectations to move higher this morning because of the news overseas with Iran. But then you had the ISM numbers, which weren't so great, and the markets were a little concerned there," Jay Suskind, co-head of capital markets at Ryan Beck & Co., told CNBC.com.
Light crude futures closed below $65 a barrel on the New York Mercantile Exchange but ended well off the worst levels of the session.
Citigroup raised earnings estimates for Microsoft , saying the successful launch of Vista and Office 2007 makes it "more confident in Microsoft's ability to produce upside in the third quarter."
Electronics retailer Circuit City reported a fourth-quarter loss as it took charges to close stores and had weaker sales at stores open at least a year. Shares fell on Wednesday after the company reported a loss of 7 cents a share, a far cry from quarterly earnings of 82 cents reported a year ago.
Meanwhile, rival Best Buy reported earnings that were slightly better than forecast as quarterly profit rose more than 18%. Best Buy said sales of home office products rose partly due to the launch of Microsoft's Vista operating system.
Monsanto shares closed up 3.2% after the agriculture and chemicals company reported strong second quarter earnings and raised 2007 earnings estimates.
Shares of SanDisk rose after Bear Stearns said weakness expected for the first-quarter has been priced into the stock already. "Investors should focus on SanDisk's earnings bottoming in the second quarter and the outlook for the second half of 2007," wrote Bear Stearns analyst Gurinder Kalra. "At these levels the upside potential on the stock exceeds downside risk."
Monster Worldwide shares fell sharply after the operator of jobs Web site Monster.com said first-quarter sales are likely to fall below its previous forecast, citing sluggish growth in its North American Internet advertising businesses.
The ADP employment index for March showed an increase in private jobs of 106,000, up from 57,000 in February. The number was slightly less than the 135,000 expected.
Treasury prices moved higher, sending yields lower.
Europe Shares Mixed, Asia Finishes Higher
The FTSE-100 closed Wednesday in London flat after trading down earlier in the session as investors await a decision on interest rates on Thursday. The Paris CAC-40 and Frankfurt DAX both closed with modest gains.
The New York Stock Exchange completed its merger with Euronext on Wednesday, creating the first trans-Atlantic stock exchange. Shares of the combined company will trade in both Paris and New York. "We are quite confident that the new company will be competitive," Marshall Carter, deputy chairman of NYSE Euronext told CNBC Europe.
French retailer Carrefour rose 3.4% on news Colony Capital founder Thomas Barrack, a minority shareholder, said the company could raise up to 30 billion euros from property sales.
Germany's DaimlerChrysler is in focus ahead of its annual general meeting later, but investors seem unlikely to get an announcement on the sale of U.S.-based Chrysler.
Scor reported a forecast beating 92% surge in 2006 net profit, as the French reinsurer continued its takeover bid for Swiss rival Converium.
South Korea's Kospi Index closed at a new record high as exporters such as Samsung Electronics gained following positive U.S. home sales data raised the outlook for South Korea's No. 2 export market. Fuel-dependent stocks such as power provider KEPCO also gained after oil prices dropped nearly 2% the previous session.
Tokyo's Nikkei 225 Average rose 1.7% to end at its highest close in five weeks as Canon and other exporters rose on hopes a softer yen would boost their earnings.
Tokyo Star Bank surged on reports that U.S. private equity group Lone Star is auctioning off its roughly $1.4 billion stake in the lender. Electronics maker Kenwood jumped after the news that it would acquire unlisted U.S. wireless communications system company Zetron.
Hong Kong stocks rallied to fresh five-week highs as strong global equities lifted confidence, with gains for property developers such as Sun Hung Kai Properties and Cheung Kong.
Australia's S&P/ASX 200 Index gained 1.3% to set an all-time closing high, buoyed by the central bank's decision to keep domestic interest rates on hold.