Stocks rose after an industry survey showed that companies expect to increase spending on new equipment next year. Computer-related shares such as Intel and Cisco Systems led the gain.
The Dow Jones industrial average climbed 100.85, or 1.2 percent, to 8574.26, and the Nasdaq composite index rose 23.62, or 1.7 percent, to 1390.76. The Standard & Poor's 500-stock index rose 12.45, or 1.4 percent, to 904.45.
Today's gains followed the biggest drop in the S&P 500 and Dow in a month. The Dow has gained 18 percent from its five-year low on Oct. 9. All three benchmark indexes are headed toward their third straight year of declines.
Stocks were helped by a semiannual survey of purchasing managers by the Institute for Supply Management showing 70 percent of manufacturers and service companies said they expect sales will rise next year.
The Federal Reserve left its benchmark lending rate at 1.25 percent, the lowest in four decades. None of the 58 economists surveyed by Bloomberg expected any change in borrowing costs.
Computer hardware and software shares led the gains after Maxtor, a maker of disk drives, boosted its fourth-quarter sales and profit forecasts.
Maxtor surged $1.11, to $5.72. The company said sales will be as much as $1.03 billion this quarter, compared with analysts' estimates of $966 million, according to Thomson First Call. The company said earnings, excluding some expenses, will be 10 cents to 14 cents a share. Analysts expected a loss of 5 cents a share.
Intel, the world's largest semiconductor maker, gained 65 cents, to $18.24. Cisco Systems, the biggest maker of networking equipment, rose 43 cents, to $13.93. Microsoft, the world's biggest software maker, rose 65 cents, to $54.18.
General Electric rose 43 cents, to $25.93. Prudential Securities analyst Nicholas Heymann said optimism is building that the world's second-largest company by market value can return to "double-digit growth" in 2004. He said the stock can climb to $34 in the next six to 12 months. That's a 31 percent gain from the closing price. Heymann rates the share "buy."
EchoStar Communications climbed $2.20, to $21.25. The satellite-television company canceled its proposed $27 billion purchase of rival Hughes Electronics, avoiding a $2.7 billion payment to buy PanAmSat.
Coca-Cola and Procter & Gamble led the Dow higher as some investors said they'd grow even if the economy didn't expand as much as some anticipate.
Coca-Cola, the world's biggest soft-drink maker, rose $1.40, to $46.50. Procter & Gamble rose $1.27, to $87.65. Philip Morris, the world's largest cigarette maker, advanced 95 cents, to $41.01.
Abbott Laboratories dropped $1.17, to $40.48. Morgan Stanley analyst Glenn Reicin reduced his rating on the drugmaker to "equal-weight" from "overweight," citing concerns about generic competition for its Synthroid thyroid treatment.
Baxter International, the world's biggest maker of therapies for blood diseases, slid 76 cents, to $31.30.
* The New York Stock Exchange composite index rose 6.05, to 482.77; the American Stock Exchange index rose 6.70, to 824.95; and the Russell 2000 index of smaller-company stocks rose 7.18, to 393.47.
* Advancing issues outnumbered declining ones by 11 to 5 on the NYSE, where trading volume fell to 1.29 billion shares, from 1.32 billion on Monday. On the Nasdaq, advancers outnumbered decliners by 14 to 9 and volume totaled 1.43 billion, down from 1.44 billion.
* The price of the Treasury's 10-year note fell 93 cents per $1,000 invested, and its yield rose to 4.05 percent, from 4.04 percent Monday.
* The dollar rose against the Japanese yen and the euro. In late New York trading, a dollar bought 123.71 yen, up from 123.33 late Monday, and a euro bought $1.0091, down from $1.0106.
* Light, sweet crude oil for January delivery settled at $27.75 a barrel, up 55 cents, on the New York Mercantile Exchange.
* Gold for current delivery fell to $323.50 a troy ounce, from $325.80 on Monday, on the New York Mercantile Exchange's Commodity Exchange.