NEW YORK (CNNfn) - Money started coming off the sidelines Wednesday as bargain-seeking investors sent U.S. stocks surging, betting that much of the bad news has already been factored into these beaten-down issues.
"Most of the bad news has been factored into this market. I think people are trying to pick their spots here and people are trying to get a leg up this week," Patrick Boyle, head financial trader with Credit Suisse First Boston, told CNNfn's Street Sweep.
A warning from computer security products maker Network Associates that it will post a fourth-quarter loss pressured the major indexes early, but investors quickly shrugged off the news.
"It's more specific to them," said Peter Coolidge, senior trader with Brean Murray & Co. "There's just lack of direction and anything can push this market in any direction."
The tech-heavy Nasdaq composite index rose for the third time in four session, eking out a decent gain, led by the chip sector. And buyers also emerged in sectors outside of technology, sending the Dow Jones industrial average higher for its fourth straight session -- led by 3M, Procter & Gamble, and the drug sector.
 "One of the pockets of strength has been in the health care area," said Ned Riley, chief investment strategist at State Street Global Advisors. "You could flip a coin on the Nasdaq -- it's been a very tepid and guarded rally in the Nasdaq . But I think the Dow gains will prevail."
Before breaking out the champagne, it looks like this may wind up being a year without a strong "Santa Claus" rally, cautioned one trader.
"People are coming in to see if there are any bargains but I wouldn't read too much into it -- it's just a bounceback," said Brean Murray's Coolidge.
 The Nasdaq gained 45.79 points, or nearly 2 percent, to 2,539.31. With only two trading sessions left in the year, the index is shaping up for its worst year ever, down 37.6 percent from the start of 2000.
The Dow added 110.72 to 10,803.16, while the S&P 500 advanced 13.73 to close at 1,328.92.
Market breadth was positive. Advancers beat decliners on the New York Stock Exchange 2,081 to 895, as more than 1.05 billion shares changed hands. On the Nasdaq winners outpaced losers 2,185 to 1,822, as more than 1.96 billion shares were traded.
In other markets, Treasury securities fell. The dollar was flat versus the euro but rose against the yen.
Blue chips rally
The Dow's gains were led by the drug sector. Johnson & Johnson (JNJ: Research, Estimates) rose 63 cents to $103, hitting a 52-week high.
"There's definitely a pickup today [Wednesday] and I think some of the cash that's been on the sidelines is starting to go back into the market," Mark Donohoe, institutional equity sales trader with U.S. Bancorp Piper Jaffray, told CNNfn's In the Money. "They're [investors] looking for bargains."
The biggest gainers on the Dow were diversified manufacturer 3M (MMM: Research, Estimates), which jumped $4.19 to $119.19, and consumer products maker Procter & Gamble (PG: Research, Estimates), which surged $2.06 to $76.50.
Wal-Mart Stores and other retailers said Tuesday that December same-store sales, or sales at stores open at least a year, are expected to fall short of forecasts -- confirming earlier fears that shoppers scaled back their holiday spending amid signs of an economic slowdown.
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 RETAIL SECTOR
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Retailers
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But shares of Wal-Mart (WMT: Research, Estimates), the nation's No. 1 retailer, rose $1.94 to $52.56, and Home Depot (HD: Research, Estimates) gained $2.06 to $42.75.
Light shines on beaten-down techs
It seems like all it takes is another warning in the tech sector to provide the catalyst for a sell-off. Wednesday's catalyst came from Network Associates, which is now poised to post a loss instead of a profit. But the sell-off was short-lived for the rest of the tech sector.
 Network Associates (NETA: Research, Estimates) dropped $7.19 to $4.56 after it warned late Tuesday it would post a fourth-quarter loss rather than the profit analysts had forecast, according to earnings tracker First Call.
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ANALYST COMMENTS
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Street Talk
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Applied Materials (AMAT: Research, Estimates) gained $1.56 to $39.56, Altera (ALTR: Research, Estimates) rose $1.63 to $28 Dell Computer (DELL: Research, Estimates) rose 50 cents to $18.
"We have some technology stocks moving higher and the large amounts of cash sitting on the sidelines will be coming back into the market," said Peter Cardillo, director of research at Westfalia Investments. "These are just relief rallies with investors trying to pick up bargains." 
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