Technology stocks rose on Wednesday as investors took heart from solid corporate earnings and shrugged off fresh evidence of a dismal housing sector, which renewed speculation the Fed will cut interest rates.
U.S. home construction starts fell in September to their lowest level in more than 14 years, the Commerce Department said. The data lifted bonds but pushed the U.S. dollar lower on concerns the housing market may drag on the U.S. economy.
Oil marched to a new all-time high near $89 a barrel as investors fretted that Turkey may launch a major military incursion into northern Iraq and a potential supply crunch this winter.
Stronger-than-expected profits from Intel Corp, Yahoo Inc and JPMorgan Chase & Co eased worries about the outlook for earnings. Intel and Yahoo forecast continued growth, and several brokerages raised their price targets on the two technology bellwethers .
So far we've got positive surprises coming in on earnings, said Michael Darda, chief economist at MKM Partners LLC, in Greenwich, Connecticut. The expectation is that there's a bounce back in the fourth-quarter, and we're back to double-digit year-over-year earnings comparisons.
The Standard & Poor's 500 Index was flat at 1538.52 and the tech-heavy Nasdaq Composite Index was up 20.33 points, or 0.7 percent, at 2,784.11.
The Dow Jones industrial average, however, was down 16.66 points, or 0.12 percent, at 13,895.75, pulled lower by a disappointing outlook from United Technologies Corp and lackluster hardware sales from IBM.
In Europe, Britain's leading blue-chip index reversed early losses to move higher as brewers Carlsberg and Heineken said they were considering a cash bid for Scottish and Newcastle.
European shares closed higher as the generally upbeat U.S. results underpinned appetite for financials and technology stocks in Europe.
The FTSEurofirst 300 index ended unofficially up 0.5 percent at 1,583.69.
The mood in Japan was gloomy. The Nikkei average fell to a two-week low as financial stocks such as Sumitomo Mitsui Financial Group Inc continued to weigh. The benchmark Nikkei average ended down 1.1 percent, or 182.61 points, at 16,955.31, the lowest close since Oct 1.
Treasury bond prices rose on the potential for the sagging housing sector to weigh broadly on U.S. economic growth and lead to an interest rate cut when Federal Reserve policy-makers meet on October 30-31, strategists said.
The fear factor is back in the market, said Andrew Richman, managing director of SunTrust's personal asset management division, based in West Palm Beach, Florida.
The jury is still out (on) how far housing is going to bleed into the rest of the economy, and whether the credit crunch is done yet, Richman said.
The benchmark 10-year U.S. Treasury note was up 17/32 to yield 4.5878 percent. The 30-year U.S. Treasury bond was up 36/32, with the yield at 4.8409 percent.
Foreign exchange traders sold dollars after the Commerce Department said home construction starts fell 10.2 percent in September, below Wall Street's consensus forecast.
The U.S. Dollar Index, which measures the dollar against a basket of major trading-partner currencies, was down 0.27 percent at 78.036 from a previous session close of 78.251.
The euro was up 0.28 percent at $1.4201 from a previous session close of $1.4161. Against the Japanese yen, the dollar was down 0.24 percent at 116.58 from a previous session close of 116.86.
In energy and commodities prices, U.S. light sweet crude oil was up 99 cents, or 1.13 percent, to $88.60 per barrel, after hitting $89.00 in earlier trading.
Turkey's parliament Wednesday granted its troops permission to launch an attack inside northern Iraq, brushing aside appeals from the United States and Iraq. Traders say the greater fear is the risk of further roil the Middle East region, which pumps one-third of the world's oil.
Surging oil prices and the falling dollar pushed up gold prices. December gold on the COMEX division of the New York Mercantile Exchange rose $2.00 to $764.00 and ounce.
(Additional reporting by Ellis Mnyandu, John Parry, Vivianne Rodrigues and Frank Tang in New York, and Yaw Yan Chong in London)