The Dow closed up 488.95, or 6.4 percent, at 8,191.29. The surge was also the Dow's first triple-digit gain since July 5. The Nasdaq advanced 61.18, or nearly 5 percent, to 1,290.23. The Standard & Poor's 500 index rose 45.73, or 5.7 percent, to 843.43.

Still, market observers were skeptical of a long-term rally and after the market closed, media giant AOL Time Warner said that regulators had opened an investigation into its accounting practices.

"Every time we've had one of these violent rallies, it's been a classic bear market bounce with no follow-through," said Todd Clark of Wells Fargo Securities.

After dropping more than 170 points in early trading, the Dow closed up 488.95, or 6.4 percent, at 8,191.29. That was second only to the 499.19-point gain it had March 16, 2000.

The tech-heavy Nasdaq composite index advanced 61.18, or nearly 5 percent, to 1,290.23. The Standard & Poor's 500 index rose 45.73, or 5.7 percent, to 843.43.

The advance was a dramatic departure from the sharp selling on Wall Street since mid-May as pessimism growing out of the accounting and ethics problems overshadowed an improving economy and healthier earnings reports.

Triple-digit drops in the Dow have become the norm – the benchmark index of the nation's 30 largest companies lost 840 points over the previous four sessions alone.

Most analysts said the rally was expected because it followed significant declines and suggested that it was not the end of the bear market. They noted that rally began shortly after the arrests of the founder of Adelphia and his two sons.

"The market has been waiting for this," Alan Ackerman, vice president at Fahnestock & Co. He also said some of the buying was based on the progress toward corporate reforms in Congress.

Some companies – including Reebok and DuPont – were rewarded for positive earnings reports. Shares of Microsoft and Intel both soared, as did Wal-Mart and Sears, Roebuck. Bargain hunters helped push J.P. Morgan Chase and Citigroup stock higher, a day after both companies were pummeled amid concerns that banks would suffer from the Enron fallout.

AOL Time Warner, which also released earnings that beat expectations by 2 cents a share, was off 75 cents in after-hours trading following the news about its accounting. The company said it stands by its books.

The rebound was welcome news after major indicators had fallen to levels not seen in at least four years.

On Tuesday, the S&P 500, a broad index of major blue-chip companies, closed below 800 for the first time since April 1997. The Dow plunged through its post-Sept. 11 lows to its lowest level since October 1998 and the Nasdaq has dropped to its lowest close since May 1997.

Overseas, Japan's Nikkei stock average fell 2.6 percent. In Europe, stocks were mixed. Germany's DAX index rose 3.3 percent, recovering from a steep drop earlier. Britain's FTSE 100 fell 2.1 percent, and France's CAC-40 lost 1.5 percent.