By Caitlin McCabe and Caitlin Ostroff 

The Nasdaq Composite rallied to a record close Thursday as investors showed renewed interest in megacap technology companies ahead of their earnings reports in the weeks ahead.

The technology-heavy index climbed 73.67 points, or 0.5%, to 13530.91, propelled higher by shares of Apple, Facebook and Amazon.com. The day marked the Nasdaq's third consecutive day of gains and its fourth record close of the year.

Gains for the Nasdaq came amid an otherwise bumpy session for U.S. stocks, with both the S&P 500 and the Dow Jones Industrial Average swinging between small gains and losses throughout the day. The S&P 500 ultimately eked out a gain to finish at a record high, rising 1.22 points, or less than 0.1%, to 3853.07.

The Dow Jones Industrial Average, meanwhile, fell 12.37 points, or less than 0.1%, to 31176.01.

Despite a turbulent start to 2021, U.S. stocks have largely continued to climb, with all three indexes currently up 1.9% or more year-to-date. The Nasdaq, in particular, has posted a strong performance, gaining 5% for the year, while the Russell 2000 index of small-cap stocks has risen 8.4%.

Driving some of those gains has been optimism that further economic recovery may be ahead under President Biden's new administration. Mr. Biden has called for a $1.9 trillion Covid-19 relief plan that includes direct payments to households and more money for testing and vaccine distribution. On Wednesday, the day that Mr. Biden took office, the S&P 500 and the Dow posted their best Inauguration Day performances since 1985, when Ronald Reagan was sworn in for his second term, according to Dow Jones Market Data.

Better-than-expected earnings reports so far this season have also buoyed markets recently.

Still, the U.S. economy faces major obstacles, with fresh data Thursday showing that about 900,000 workers filed for unemployment benefits for the week ended Jan. 16, as companies continued to lay off workers amid a surge in Covid-19 cases.

Meanwhile, the coronavirus pandemic continues to loom large. The U.S. recorded 4,375 deaths for Wednesday, the second-highest daily number ever.

Analysts say those factors -- along with Netflix's strong earnings this week -- have renewed investor interest for "stay-at-home stocks" that were popular for much of 2020. Apple gained $4.84, or 3.7%, to $136.87. Amazon.com added $43.61, or 1.3%, to $3,306.99.

"You've got this rotation going on under the surface for a second day in a row where the small-cap stocks and the cyclical plays have been giving some back to the tech and stay-at-home areas," said Ryan Detrick, chief market strategist for LPL Financial.

"That's the lifeblood of a bull market -- to see a rotation," he added.

Traders this month have been closely eyeing earnings to see if they support the strong run across markets in recent months. Many investors are still betting on an economic recovery this year as Covid-19 vaccinations ramp up, increasing prospects for future earnings.

Earning results so far have been better than expected, and as of early Thursday afternoon, the percentage of S&P 500 companies that have beat estimates hovered slightly below 90%, according to FactSet. Several companies have been rewarded by investors for the strong earnings results.

Shares of Travelers, one of the nation's biggest sellers of insurance to businesses and a top consumer-car insurer, climbed $3.70, or 2.6%, to $148.72 Thursday after reporting its net income surged in the fourth quarter.

"Earnings season looks relatively good and seems to confirm this picture that the U.S. -- because there was no full lockdown -- did well in the fourth quarter," said Carsten Brzeski, ING Groep's global head of macro research. "Stock markets are really looking through the short-term outlook for the economy, which has worsened over recent days."

Investors are also paying close attention to corporate guidance in the sectors most affected by the pandemic. Shares of United Airlines fell $2.59, or 5.7%, to $42.59 after the airliner said late Wednesday it expected the coronavirus to continue to weigh on travel demand this year.

In other corporate news, Ford Motor climbed 67 cents, or 6.2%, to $11.53, its highest close since June 2018. Shares of the company have jumped on upbeat analyst outlooks. Ford also holds a stake in electric-vehicle startup Rivian Automotive, which raised another $2.65 billion earlier this week.

Supporting markets is also the expectation that central banks and governments will step in if financial conditions deteriorate. This has encouraged investors to seek out higher returns, including in overseas markets.

Japan's Nikkei 225 Index rose 0.8% Thursday. India's benchmark stock gauge, the S&P BSE Sensex Index, hit a record Wednesday. Indexes in China and South Korea rallied Thursday, with the Shanghai Composite up 1.1% and Korea's Kospi gaining 1.5%.

The pan-continental Stoxx Europe 600 added less than 0.1% after the European Central Bank held steady on interest rates.

The backstop from governments and central banks -- plus consensus among investors for a strong economic recovery this year -- has lessened volatility. The Cboe Volatility Index, known as the VIX and seen as Wall Street's fear gauge, was at 21.32 Thursday, down from 25.16 a month ago, but higher than the 19.48 historical average for the VIX.

The yield on the benchmark 10-year Treasury note ticked up to 1.107% Thursday, from 1.089% Wednesday. Yields rise when bond prices fall.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

(END) Dow Jones Newswires

January 21, 2021 17:20 ET (22:20 GMT)

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