NEW YORK - The Nasdaq composite index soared to the biggest gain in its 29-year history yesterday after Federal Reserve Chairman Alan Greenspan suggested that the central bank is prepared to cut interest rates.
The Nasdaq surged 274.05, or 10.48 percent, to 2,889.80. After an unprecedented 86 percent rally last year, the index has fallen almost 50 percent from its March 10 record as profit growth slowed after the Fed's six interest-rate increases.
"I would say we have probably seen the bottom, or we're very close to it," said Ryan Crane, who helps manage $125 billion at AIM Advisors Inc. in Houston. "People realize that these stocks are pretty cheap."
The Dow Jones industrial average climbed 338.62, or 3.2 percent, to 10,898.72, its biggest gain since March 16. The Standard & Poor's 500 index gained 51.57, or 3.9 percent, to 1,376.54.
Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, rose 20.78 to 471.17, and the Wilshire 5000 index jumped 532.70 to 12,616.90.
Stocks also benefited from a Florida court decision that boosted the odds that George W. Bush will become the next U.S. president.
"We were buying this morning, have been buying all afternoon and will continue to buy," said Austin Crowe, a portfolio manager with T. O. Richardson Co. in Farmington, Conn. "Greenspan turned on a big green light, and that, combined with the fact that the election is nearly decided," prompted the firm to buy stocks, he said.
Microsoft advanced $3.44 to $59.88. Investors expect the world's biggest software maker to benefit from a more lax approach to antitrust regulation in a Bush presidency.
Philip Morris rose 88 cents to $38.56, and RJ Reynolds Tobacco Holdings Inc. gained $1.75 to $41.50. Bush said if he were elected president, he would not pursue the U.S. Justice Department's lawsuit against tobacco companies to recover the cost of treating sick smokers.
More than two stocks rose for every one that fell on the New York Stock Exchange. About 1.42 billion shares traded on the Big Board, 26 percent more than the three-month daily average and the sixth-most on record. More than 2.4 billion shares traded on the Nasdaq stock market, the fourth-most on record.
Some investors were cautious about whether the Nasdaq's nine-month slide is over.
Cisco Systems Inc., the No. 1 maker of networking equipment, gained $6.31 to $52.13; Sun Microsystems Inc. climbed $12.88 to $91.75; Veritas Software Corp. jumped $21.44 to $122.19; and Intel Corp. advanced $3.06 to $36.
Two Maryland-based network-equipment makers posted hefty increases along with others in the industry. Corvis Corp. spurted $7.69 to $40, and Ciena Corp. surged $19.63 to $99.81, helping push the Sun-Bloomberg Maryland index of the top 100 stocks in the state 15.43 higher to 230.74.
Drug stocks fell as investors flocked to technology companies.
Merck & Co. lost $1.94 to $90; Schering-Plough Corp. declined 69 cents to $54.50; and Eli Lilly & Co. eased 6 cents to $90.38.
3M gained $11.63 to $116.63, after the maker of Post-It Notes and 50,000 other products said it named General Electric Co.'s James McNerney as chairman and chief executive.
Charles Schwab Corp., Merrill Lynch & Co. and other investment bank and brokerage stocks surged as investors bet that their business will benefit if the stock market now pushes ahead.
Schwab, the world's biggest discount broker, rose $3.69 to $29.75, while Merrill Lynch, which employs the most brokers of any Wall Street firm, advanced $5.81 to $64.75.
The Amex Securities Broker/Dealer Index rose 9.2 percent, with all 13 members gaining.
One indication of the strength of yesterday's rally and how far some stocks have fallen was that chip makers Xilinx Inc. and LSI Logic Inc. rose even after saying revenue grew less than expected.
Oil stocks were among the S&P 500's biggest decliners after crude oil dropped 5 percent, below $30 a barrel for the first time in four months.
Exxon Mobil Corp. slid $2.31 to $88.38, while Royal Dutch Petroleum Co. lost $1.38 to $59.13.
Software maker Intuit Inc. jumped $5.38 to $50.88 after Standard & Poor's said it will add the company to the S&P 500.
Other companies that S&P said it would add are: Allegheny Energy Inc., an electric company, which rose 63 cents to $43.13; Ambac Financial Group Inc., the second-largest municipal bond insurer, which gained $2.81 to $81.31; and Symbol Technologies Inc., which makes bar-code scanners and rose $2.13 to $42.50.
Overseas, Japan's Nikkei stock average fell 1.7 percent; Germany's DAX index climbed 3.6 percent; Britain's FTSE 100 gained 2.3 percent; and France's CAC-40 rose 3.5 percent.