The Nasdaq composite index rose 84.31, or 2 percent, to 4,098.34, and the Standard & Poor's 500 index climbed 10.16 to 1,502.41.
The Nasdaq is flat from last year's close at 4,069.31, and up 44 percent from a close of 2,837.26 last Sept. 7.
The Dow Jones industrial average fell 51.51 to close at 11,259.13 led by Dupont, which fell $5.25, or 11 percent, to $41.75.
"This was a reaction to the big drops from the last couple of days," said Ed Keon, a market strategist at Prudential. "There are still people who love big-cap Nasdaq stocks."
At the end of regular trading, Intel closed up $1.75 at $67.44, while Microsoft ticked up 63 cents to $70.06. Sun Microsystems rose $6.31 to $123.94, and Cisco Systems climbed $2 to $66.25.
The CNET tech index gained 54.16 to close at 3,269.99. Losers edged out winners, with 69 of the 97 stocks in the index rising, 26 falling and two remaining unchanged.
Of the 18 sectors tracked by CNET Investor, makers of server hardware and computer data storage companies led the charge, rising 4 percent. Internet e-tailers were the day's largest losers, falling 1 percent.
The Philadelphia semiconductor index rose 36.82, or nearly 4 percent, to 1,094.50 after dropping throughout the week. Chipmaker Xilinx cleared the way, climbing $5.63 to close at $87.56.
Keon believes that the current upswing in the chip industry cycle still has room to move higher. "The chip sector might not be as robust as it was, but we think the cycle has a way to go, especially certain parts of it," he said.
But the market isn't likely to return to the unprecedented growth rates or valuations of earlier this year and in 1999. Sustainable and realistic price-to-earnings ratios, which soared to illogical levels a year ago, will become critical benchmarks in the future, Keon said.
According to First Call, second-quarter earnings in the S&P 500 grew by 21.6 percent from the same quarter in 1999. First Call expects third-quarter earnings growth of 17.2 percent, and 15.8 percent in the fourth quarter, which could cause investors to rethink the value of stocks that are priced 80 to 100 times above earnings.
Read-Rite increased $2.75, or 35 percent, to $10.56 after the maker of computer disk drive equipment announced that it had formed a company to manufacture components for fiber-optic networks. Volume topped 41 million shares, more than 15 times the stock's daily average volume of 2.7 million shares.
Among members of the CNET tech index, Vitesse Semiconductor and Unisys posted strong gains.
Vitesse rose $10.69, or 13 percent, to $90.44, and Unisys gained $1.38, or 10 percent, to $14.50.
Shares of software developer Retek rose $9.25, or about 29 percent, to $41.38 after IBM said the companies had expanded an alliance to sell e-commerce products. IBM rose $1.69 to $133.13.
Shares of MP3.com took a hit after a judge issued a ruling that could cost the company millions. The stock fell $1.69, or 21 percent, to $6.19.
Internet e-tailers, which had been inching up for the past week, dipped today. After a strong August, Amazon.com fell $2.38 to $43.94. Priceline.com slipped $1.56 to $25.94.
Bad news caused more bloodletting among Internet consulting firms today. Shares of Organic fell 53 cents to $4.78 after the company announced third-quarter revenue will be less than expected and that it does not expect to reach its goal of profitability during the third quarter.
Other consultants took a hit. Viant fell 25 cents to $7.88; Scient dropped $1.75 to $20.75. Razorfish slipped 44 cents to $12.