"For a sustainable rally, some high-profile companies have to show earnings improvement," said Robert Christian, chief economist and chief investment officer at Wilmington Trust, which manages $27 billion in Wilmington, Del. "Cisco could be the one that gets things going."

The Dow closed up 305.28, or 3.1 percent, at 10,141.83, according to preliminary calculations. It was the biggest point and percentage gain since Sept. 24, when the average advanced 368.05 and 4.5 percent.

Broader stock indicators fared even better. The Nasdaq rose 122.45, or 7.8 percent, to 1,696.27, its biggest point gain since April 18, 2001, when the index advanced 156.22. It was the eighth largest percentage gain ever.

The Standard & Poor's 500 index was up 39.35, or 3.8 percent, at 1,088.84, its biggest point increase since April 18, 2001, and biggest percentage gain since Sept. 24.

Merrill Lynch & Co. lifted financial shares after the biggest brokerage said it is close to settling New York State's claims that it misled investors with biased stock research.

More than 909 million shares traded on the New York Stock Exchange by 1:20 p.m. in New York, 16 percent more than a week ago. Three stocks rose for every two that fell on the Big Board while advancing shares outnumbered decliners two-to-one on the Nasdaq Stock Market.

Cisco surged $2.92 to $16. The company said yesterday after markets closed it earned 11 cents a share in the fiscal third quarter, excluding certain costs, beating estimates by 2 cents. Its sales rose for the first time in five quarters.

Microsoft, the largest software maker, gained $4.47 to $53.94, and Intel, the biggest chipmaker, advanced $2.53 to $28.68.

General Electric rose $2.29 to $32.94. The company said it is "on track" to meet its 2002 per share profit goal of $1.65 to $1.67. Analysts have been forecasting $1.65. The company also said it expects double-digit earnings growth in 2003. Chief Executive Jeffrey Immelt said there are "some signs" of recovery in its economically sensitive businesses, such as plastics.

Even with today's advance, the Dow is up just 1 percent for the year, the S&P 500 is down

5.3 percent and the Nasdaq is off 13.4 percent. Some investors say more declines lie ahead.

"Cisco is good news, but it's not a cheap stock and the market's not cheap," said Darcy MacLaren, director of equity research and a money manager at Safeco Asset Management, which manages $30 billion in Seattle. The market is "fairly valued, at best," she said.

The S&P 500 trades for 21 times expected earnings, down from 26 earlier in the year. With interest rates at these levels, fair value would be a PE ratio between 19 and 21, MacLaren said. "Cheap is 15 to 16."

Cisco trades at 51 times forecast earnings.

Cisco's rivals and suppliers surged. Its main competitor, Juniper Networks Inc., down

56 percent this year, advanced $1.05 to $9.49. IBM, trading near its lowest since November 1998, gained $5.50 to $82. The largest computer maker's services unit resells and installs Cisco products in data networks.