The Nasdaq composite index gained 218.37, or nearly 7 percent, to 3,539.66--the largest point increase and second-largest percentage rise in its history.
The Dow Jones industrial average jumped almost 3 percent, climbing 276.74 to close at 10,582.51, its seventh-largest point gain, led by Intel and Hewlett-Packard.
The CNET tech index rose 195.56 to close at 2,897.43, led by shares of Exodus and PMC-Sierra, and the Standard & Poor's 500 index added 44.19 to 1,401.43.
Winners edged out losers, with 71 of the 98 stocks in the index rising, 30 falling, and one remaining unchanged.
Of the 18 sectors tracked, semiconductor companies posted the sharpest gains, rising about 13 percent. Server software, server hardware and storage companies also posted strong gains of about 11 percent. Internet retailers recorded the day's largest losses, falling almost 2 percent.
Intel gained $12.75, or nearly 12 percent, to close at $123.25, and Microsoft inched up $1.75 to $75.88. Microsoft was hit with another security problem in its Web management software used on hundreds of thousands of Web sites.
Internet Initiative Japan was one of the biggest percentage gainers on the Nasdaq. The shares jumped $16.38, or about 50 percent, to $49.38. According to Reuters, the company said that it would offer data services to South Korea's Samsung and InfoBank.
Among members of the CNET Tech Index, Exodus posted strong gains, rising $18.94, or 22 percent, to $104.50. The company announced that it struck an alliance with Microsoft to help businesses get online faster.
Network semiconductor maker PMC-Sierra rose $40.81, or 34 percent, to $159.25 on a volume of 13.4 million shares--more than three times the stock's average daily volume.
The Philadelphia semiconductor index leaped 117.72, or 13 percent, to 1,009.88, led by chip equipment maker Novellus, which gained $12.75, or 31 percent, to close at $53.50. Applied Materials rose $16.31, or 20 percent, to $96.63, and KLA-Tencor rose $10.38, or 18 percent, to $68. Novellus and Lattice Semiconductor both were scheduled to report earnings today after the markets closed.
Knight/Trimark fell $3.38 to $30.06. The company said it will buy Quartz Capital to expand its trading operation in Europe.
Online broker Ameritrade rose 59 cents to $14.84, while E*Trade dropped $1 to $18.19.
A coalition of international unions asked the European Commission to block MCI WorldCom's proposed $128.6 billion purchase of Sprint. MCI closed up $2.13 at $40.13, while Sprint closed down 94 cents at $57.
CMGI postponed the initial offering of search engine AltaVista because of stormy market conditions. Shares of CMGI rose $12.94, or almost 25 percent, to $65.
Shares of Analog Devices, DLJ Direct and Texas Instruments could see heavy trading tomorrow. The tech companies were scheduled to report earnings today after the markets closed.
Reuters contributed to this report.