The Nasdaq composite index rose 96.58, or almost 3 percent, to 3,816.82, and the Standard & Poor's 500 index climbed 23.25 to 1,432.63.
The Dow Jones industrial average rose 165.37 to close at 10,577.86, led by United Technologies and SBC Communications.
Intel gained $3.81 to $123.38, and Microsoft inched up 69 cents to $71.83. Microsoft and Netscape Communications are pointing fingers at each other over a browser-related security problem.
The CNET tech index rose 15.66 to close at 2,925.42. Winners edged out losers, with 68 of the 99 stocks in the index rising, 30 falling and one remaining unchanged.
Of the 18 sectors tracked, server hardware companies posted the sharpest gains, climbing about 6 percent. Computer memory storage companies were the day's only losers, falling a slim 0.11 percent.
Among members of the CNET Tech Index, ADC Telecommunications and Cypress Semiconductor posted strong gains.
ADC rose $5.88, or 10 percent, to $63.13. The phone-equipment maker said it agreed to buy two closely held optical-parts companies for $952 million in stock and cash as it seeks a bigger piece of the burgeoning market.
Cypress rose $5.88 to $57.44 on a volume of 4.7 million shares, more than twice the stock's average daily volume.
Shares of Nortel Networks gained $7.50 to $116.81. STMicroelectronics will sell the company as much as $2 billion in semiconductor products over three years as part of an agreement to buy a Nortel chip plant for $100 million.
The Philadelphia semiconductor index rose 17.47 to 1,105.13, led by Lattice Semiconductor, which gained $2.69 to close at $63.88.
Mexican billionaire Carlos Slim Helu has bought a 9.2 percent stake in troubled online music retailer CDNow for $52.8 million. Shares of the company rose 81 cents, or 21 percent, to $4.69.
Cisco Systems made a nearly $6 billion bet today and bought ArrowPoint Communications, wagering that equipment for speeding Web site content to its destination will be big business. Cisco shares gained $4.13 to $67.75, while ArrowPoint closed up $5.38 at $140.19.