The Nasdaq rallied 103.70 points to 2,075.74, and the Dow Jones industrial average gained 237.90 to 10,478.90.
Technology stocks were barely affected by the day's economic news, which cast more doubt on the struggling U.S. economy. The Labor Department's weekly report on the number of filings for state jobless benefits showed they were up 42,000 to 445,000--the highest level in nine years. Economists had expected claims to decline to 390,000 from 399,000 the week before.
"While the claims at this level are unquestionably disconcerting," wrote Merrill Lynch analyst Bruce Steinberg in a note on the economics report, there are two good explanations for the surprising increase.
"First, jobless claims historically rise in the week containing the July 4 holiday," he said. Secondly, the analyst said, "the automobile sector had an early shutdown this year for retooling many plants."
Microsoft was bounding ahead after announcing it would report better-than-expected sales for the fourth quarter.
The software giant took many of its competitors and most technology bellwethers with it. The CNET PC Software index was up more than 7 percent, while Oracle rose $1.64 to $19.64, Cisco Systems gained $1.16 to $17.86 and Intel rose $2.04 to $31.10 after the news.
Motorola announced some mixed news. The mobile handset maker lowered its projections for the rest of the year due to the gloomy telecommunications market. However, on Wednesday Motorola posted an operating loss of 11 cents a share, beating Wall Street consensus for a 12 cent-per-share loss. Shares were up $2.48 to $18.15.
Communications company Sonus was also making gains. Shares were up $3.58, or nearly 19 percent, to $22.51 following the company's solid second-quarter report, and news of a deal with BellSouth.
Yahoo was up $1.23 to $18.26 following its good news. The Internet company inched past estimates in its second-quarter report Wednesday night, and Wall Street analysts upgraded or maintained their ratings.
Amazon.com rose $1.15 to $16.49, and AOL Time Warner gained $1.55 to $50.05.
Staff and Reuters contributed to this report.