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NEW YORK — Wall Street sent stocks higher Tuesday as investors decided to place some cautious bets on bargain-priced shares instead of punishing companies for lower earnings. 

Despite the market’s healthy advance, analysts said investors are struggling to balance caution with optimism. 

Investors seem to be growing more confident that profits and the economy will improve, partly because of lower interest rates.  

The market is hopeful that the Federal Reserve will lower rates for the second time in a month when it meets next week. 

One sign of increasing optimism is that the market seems to again be favoring tech stocks rather than so-called defensive issues that tend to perform better in bearish markets. 

“People feel it might be time to take some money out of the defensive issues and get back into tech,” said Richard Dickson, technical analyst at Scott & Stringfellow Inc. in Richmond, Va. 

At the same time, investors are wary as they try to determine whether bad earnings news has been factored completely into the cheaper prices of many stocks. 

— The Associated Press 

Some investors “take encouragement that many high-techs have managed to rebound from earnings disappointments. But others are thinking that first-quarter earnings are going to be bad, and so are second quarter’s,” Dickson said. 

With a long list of companies reporting fourth-quarter results, earnings still promise to be a focus for the next few sessions. But analysts say it’s hard to tell day to day how earnings will affect trading. 

“It could be just as downbeat tomorrow,” said Charles G. Crane, strategist for Spears, Benzak, Salomon & Farrell. 

Compaq, which announced after the market closed Tuesday that it beat earnings expectations by 2 cents a share, was unchanged in extended-hours trading after rising 23 cents to $20.05 in the regular session. 

Texas Instruments fell $3.56 to $45 after a disappointing earnings report and first-quarter outlook. 

Drug stocks fell despite positive earnings news. Merck, which met Wall Street’s forecasts, dropped $2.75 to $79.56. Johnson & Johnson reported it beat expectations by a penny, but its stock fell $1.63 to $92.69. 

Analysts said the pharmaceutical sector, which has had a recent run up as investors sought safe havens, has become too expensive. 

However, another defensive sector got an earnings-related boost. Energy company Dynegy picked up $1.50 to trade at $50.25 after beating earnings predictions by 4 cents a share. 

Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange, where consolidated volume was 1.48 billion shares, compared with 1.41 billion on Monday. 

The Russell 2000 index rose 11.91 to 502.06. 

Overseas, stock markets were mixed. Japan’s Nikkei stock average fell 0.3 percent, as did Britain’s FT-SE 100, and France’s CAC-40 slipped 0.7 percent. Germany’s DAX index rose 0.7 percent. 

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