The Nasdaq composite index rose 11.43 to close at 1,930.32, and the Dow Jones industrial average gained 46.57 to 10,392.52.
Earlier in the day, Ciena took technology stocks for a plunge, as its shares dropped 30 percent, tripping up the telecom-equipment sector and dragging the Nasdaq down almost 2 percent, to as low as 1,879.07.
The day's economic news encouraged investors. Reports on inflation and housing starts both showed improvement in the U.S. economy.
The Consumer Price Index showed that inflation is retreating. The measure of price levels of goods and services, reported by the U.S. Department of Labor, dropped 0.3 percent in July, as a drop in gasoline prices heavily influenced the index. The core index, which excludes food and energy, rose slightly, however, advancing 0.2 percent. Economists expected the overall index to be unchanged, and the core index to rise by 0.2 percent
The Department of Commerce reported that housing starts--the number of residential units on which construction is begun each month--were at a seasonally adjusted annual rate of 1.672 million units last month, a 2.8 percent increase from the June rate of 1.627 million. The results were also higher than the 1.627 million rate economists predicted.
Shares of Ciena, the most active stock on the Nasdaq, plunged $8.50 to $19.62, or more than 30 percent, after the company cut its outlook on a conference call Thursday morning. The company reported an otherwise pleasing third quarter, doubling its profits.
CNET's Telecom Equipment index fell almost 4 percent.
Brocade was also a heavy decliner. Shares plummeted $2.38 to $27.96 even though analysts came up with some ornate reasons to maintain their "buy" ratings while lowering estimates.
The whole storage sector suffered; CNET's Storage index rebounded to slight gains after dropping around 4 percent earlier in the day.
Corning rose 13 cents to $15.05 after announcing on Wednesday that its cable unit will cut 900 jobs. The maker of fiber-optic cable said 450 people were laid off and another 450 positions were cut using buyouts and retirement offers. Corning's cable unit has now reduced its work force by 1,140 jobs, or 8 percent, since May.
Among other heavily traded techs, Intel rose 30 cents to $30.08, Microsoft rose $1.26 to $64.46, Oracle gained 29 cents to $15.30, Cisco Systems rose 48 cents to $17.48 and Sun Microsystems lost 6 cents to $ 14.71.
Amazon.com fell 27 cents to $9.81, AOL Time Warner rose 35 cents to $40.05 and Yahoo gained 53 cents to $14.79.
Staff and Reuters contributed to this report.