Stocks end higher after Tuesday's big gain

• Major indexes make gains
• IBM drags down Dow Jones index
• ETFs offer clues to continuing long-term rally

Stocks climbed some more Wednesday, following Tuesday's big gain, the biggest one-day rise since Sept. 13.

A surprisingly strong housing report helped push the broad stock market up, even as weak earnings reports from Intel and IBM weighed on the Dow Jones industrial average, which ended the day only marginally up, gaining 5 points, or 0.04%.

The S&P 500 did better, closing up 0.4%. The other major index, the Nasdaq, was up 0.1%.

IBM reported sales late Tuesday that fell below Wall Street's expectations. On a call with analysts, IBM's chief financial officer said the company faced "more challenging" market conditions in September, the final month of the quarter, as cautious customers and a weakening euro undercut results.

Intel warned that sales of personal computers will likely remain weak during the holiday season. The chip-maker cut its revenue estimates for the year-end quarter when it reported results late Tuesday.

On the plus side, the Commerce Department said Wednesday that builders broke ground on new single-family houses and apartments at the fastest pace since July 2008.

"You might think it's a misprint," said Dan Greenhaus, chief global strategist at BTIG, in a note to clients. But over the past year, housing starts have climbed 43%.

"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," Greenhaus said.

The housing report helped push the yield on 10-year Treasury notes up to 1.78% from 1.72% late Tuesday. Better economic news usually sends traders out of safe assets like Treasuries.

Among big corporate names reporting earnings Wednesday, Bank of America turned a small profit; Wall Street was expecting a loss. And PepsiCo said net income dipped 5% as it poured money into marketing.

Whenever stocks are up big — as they were Tuesday — people question whether the rally is real or a one-time wonder. You can get a hint from looking at two exchange traded funds.

Both funds track the stocks in the Standard & Poor's 500 index, but each does so differently. SPDR S&P 500 fund (SPY), weights each stock by market capitalization — share price multiplied by number of shares.

Cap-weighting means that Apple, the largest company in the S&P 500, has much greater impact on the index than Oracle, which ranks 20th.

Guggenheim S&P 500 Equal Weight fund (RSP) uses all the stocks of the S&P 500, but gives each one the same weight. Apple and Oracle get the same weighting as Chipotle.

When SPY greatly outperforms its equal-weight cousin, large-company stocks are forging ahead. When Guggenhem S&P 500 Equal Weight is on top, it means that the entire market is surging — including the wee folk.

So far this year, SPDR S&P 500 has gained 16.5%, including reinvested dividends, vs. 14.4% for the equal-weighted fund, Morningstar says. When big stocks run too hot for too long, it's a sign the overall market is running out of steam. Investors are just bidding up the prices of the biggest — and theoretically safest — stocks in the index.

The past three months paint a different picture, however: The equal-weighted fund is up 7.2%, vs. 6.7% for the cap-weighted fund. So the recent rally may yet have some legs left, and small-company stocks may keep rallying.

Contributing: Associated Press