Techs fuel bigger advance

Stocks rallied Thursday, building on the recent market advance, as investors welcomed an upgrade of Intel, lower commodity prices and improved earnings forecasts from Dow stocks Wal-Mart and DuPont.

The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index both added 0.4%. The Nasdaq composite (COMP) and the Russell 2000 (RUT) small-cap index both added 1.3%.

A bullish analyst note on the chip sector and talk that Yahoo and AOL may team up were among the factors supporting technology shares. Meanwhile, investors also welcomed improved first-quarter earnings estimates from chemical maker DuPont and retailer Wal-Mart.

"We're looking at some good earnings forecasts today and that really got the market going," said Greg Church, president of Church Capital. "Everyone is expecting poor first-quarter earnings, so to have a couple of Dow components say things are looking better sets a good tone."

First-quarter earnings are expected to have fallen around 13% from a year earlier, due largely to weakness in the financial sector.

The gains Thursday were also reflective of a better mood on Wall Street that seems to have emerged since the near-collapse and rescue of Bear Stearns a few weeks ago, with JP Morgan and the Federal Reserve stepping in. (Full story).

"Conditions in the credit market have improved and that's been helping the tone," said Robert Philips, president and chief investment officer at Walnut Asset Management.

"While there are lots of issues that still need to get resolved, a fear of the whole system falling apart has passed," he said.

Friday brings results from Dow component General Electric (GE, Fortune 500). Investors will also see the March reading on import and export prices as well as the April consumer sentiment index from the University of Michigan.

Also in focus: News that Yahoo (YHOO, Fortune 500) and Time Warner's (TWX, Fortune 500) AOL are reportedly in talks to combine their Internet operations, in a move that would challenge Microsoft's (MSFT, Fortune 500) attempt at buying Yahoo (YHOO, Fortune 500). Time Warner is the parent company of CNNMoney.

In response, Microsoft is now talking with News Corp. (NWS, Fortune 500) about a joint bid for Yahoo, according to reports.

Meanwhile, Yahoo is also looking at a potential advertising deal with Google (GOOG, Fortune 500).

Intel (INTC, Fortune 500) rallied after Banc of America securities upgraded it to "buy" from "neutral," according to published reports. The upgrade was part of a broader bullish note on the chip sector.

All the activity gave a boost to the tech sector, enabling the Nasdaq composite to advance more than the other major gauges.

Retailers' tough March. Wal-Mart Stores (WMT, Fortune 500) said that first-quarter earnings would top forecasts. However, the world's largest retailer also reported a smaller-than-expected rise in March sales at stores open a year or more.

Wal-Mart's sales were representative of a maddening month for merchants, in which cooler weather and sluggish spending cut into profits.

Among other companies, Limited Brands (LTD, Fortune 500), Pacific Sunwear (PSUN), Gap (GPS, Fortune 500), Saks (SKS) and Abercrombie & Fitch (ANF) all reported March sales declines.

Discount retailer Costco (COST, Fortune 500) said March sales rose 7%, topping forecasts. Shares gained.

Other corporate news. Lehman Brothers (LEH, Fortune 500) liquidated three funds last month, worth about $1 billion, after their assets began to deteriorate amid the credit crisis. (Full story).

Virgin Media (VMED, Fortune 500) plunged 11% after the company said it was selling $1 billion in bonds to pay off debt.

Millennium Pharmaceuticals (MLNM) rallied almost 50% on news that Japan's Takeda Pharmaceutical will buy the biotech in an $8.8 billion all-cash offer.

Market breadth was positive. On the New York Stock Exchange, winners topped losers three to two as 1.28 billion shares changed hands. On the Nasdaq, advancers trumped decliners four to three on volume of 2.21 billion shares.

Economic news. The February trade balance showed imports outweighed exports, surprising economists.

A separate report showed the number of Americans filing new claims for unemployment last week fell more than expected.

In another bad sign for the struggling economy, more than 50% of panelists who participated in the Blue Chip Economic Indicators Survey say the economy is already in or will soon fall into a recession.

Federal Reserve Chairman Ben Bernanke, speaking Thursday afternoon, said that regulators have to get going putting measures in place to prevent a future financial crisis from happening. (Full story).

Commodity prices. U.S. light crude oil for May delivery fell 76 cents to settle at $110.11 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $5.30 to $932.20 an ounce.

Other markets. The dollar gained versus the euro and rose against the yen. The greenback briefly touched an all-time low versus the euro before rebounding after the Bank of England cut its base lending rate by a quarter-percentage point to 5%, a 17-month low. The European Central Bank held rates steady at 4%.

Treasury prices fell, raising the yield on the benchmark 10-year note to 3.54% from 3.48% late Wednesday. Bond prices and yields move in opposite directions.