NEW YORK (CNNfn) - U.S. equity markets soared Wednesday in a tech-led rally, as Wall St. bulls found their long-dormant confidence boosted by President Bush's stimulus proposal and strong economic data.
On the day after the Federal Reserve cut interest rates to the lowest level in nearly 40 years, the Dow Jones industrial average topped 9,000 for the first time since Sept. 17 and the Nasdaq composite index rose almost 6 percent.
"People are enthusiastic. This is a good sign," John Roque, market analyst, Arnhold S. Bleichroeder, told CNNfn's Street Sweep. "It's encouraging to see stocks trying to claw their way up, but it's hard to tell if it will last."
The Dow industrials rose 173.19 to 9,123.78, the first time the indicator has been above 9,000 since Sept. 17, the day the stock markets resumed trading after being closed four days due to the terrorist attack against the United States. The Dow rallied from being down 89 points in the first minutes of the trading day.
The Nasdaq composite index rose 88.49 to 1,580.82 after being down as much as 19 points earlier in the session. The Standard & Poor's 500 index was up 20.95 to 1,072.28.
Opening losses were erased when a National Association of Purchasing Management report showed the services portion of the economy strengthened in September. Economists surveyed by Briefing.com had expected the index to fall. The report included only some data from after last month's attack.
Just steps from the World Trade Center disaster site in New York, President Bush told business leaders he will seek a $60 billion to $75 billion economic stimulus package in the wake of the Sept. 11 attack. Bush gave no specific proposals, but said the plan would be aimed at encouraging consumer confidence and business investment, as well as helping displaced workers.
"You're coming off a period of extreme volatility, oversold conditions and disappointing earnings," said David Katz, chief investment officer at Matrix Asset Advisors. "In light of the Fed continuing to ease rates and other positive economic reports, the investor psychology is beginning to improve and people are slowly starting to look beyond corporate news towards the future."
Giving the rally a second wind was a bellwether of the tech sector, networking equipment leader Cisco Systems (CSCO: up $2.47 to $13.95, Research, Estimates), which said it is comfortable with expectations for the quarter ending this month.
Strength in the computer, retail, and biotech sectors overwhelmed a weak telecommunications and fiber-optic contingent, which suffered the effects of corporate warnings and negative analyst commentary.
"Strength begets strength," Katz added. "When a rally starts to pick up a little, people jump on the bandwagon.
Market breadth was positive on heavy volume. On the Nasdaq, winners topped losers by an almost 2-to-1 margin on volume of 2.67 billion shares. On the New York Stock Exchange, advances led declines by a more than 2-to-1 margin as 1.65 billion shares changed hands.
"The volume is really the key here as far as sustainability is concerned. People are coming in strong," Michael Balog, managing director of equity trading, Banc of America, told CNNfn.
Asian markets closed lower Wednesday, with Tokyo ending a four-day rally. European stocks pared most of their losses by the close.
Treasury prices rose. The dollar was weaker against both the yen and the euro.
Computer stocks lead the rally
Computer, software, semiconductor and biotechnology stocks were among the techs leading the Nasdaq up.
Cisco's news boosted semiconductor and semiconductor equipment makers, including the networking company's customers Applied Micro Circuits (AMCC: up $1.40 to $7.69, Research, Estimates) and PMC-Sierra (PMCS: up $2.19 to $12.08, Research, Estimates). The Philadelphia Semiconductor index, or Soxx, rose nine percent on the day.
Dell Computer (DELL: up $2.10 to $20.64, Research, Estimates) gave a boost to the computer hardware stocks after a Securities and Exchange Commission filing showed CEO Michael Dell bought 4.3 million shares of Dell between Sept. 20 and Sept. 27. IBM (IBM: up $3.18 to $96.95, Research, Estimates), Hewlett-Packard (HWP: up $0.75 to $16.00, Research, Estimates), and Compaq Computer (HWP: up $0.75 to $16.00, Research, Estimates) rose as well.
Business software makers led the Goldman Sachs software index up by more than 9 percent.
Kronos (KRON: up $13.31 to $53.71, Research, Estimates) raised its fourth-quarter estimates. Interwoven (IWOV: up $1.77 to $5.98, Research, Estimates) got an upgrade from UBS Warburg. And Goldman noted that Siebel Systems (SEBL: up $2.55 to $17.61, Research, Estimates) said nothing about its third quarter at its analyst day Tuesday – a good sign that it probably won't pre-announce a warning.
PeopleSoft (PSFT: up $3.14 to $23.68, Research, Estimates), Oracle (ORCL: up $1.06 to $13.66, Research, Estimates), and BEA Systems (BEAS: up $2.52 to $12.60, Research, Estimates) also advanced.
So-called "new economy" tech leaders such as Sun MicroSystems (SUNW: up $0.99 to $9.00, Research, Estimates), Intel (INTC: up $1.69 to $21.23, Research, Estimates), Microsoft (MSFT: up $3.18 to $56.23, Research, Estimates), and JDS Uniphase (JDSU: up $0.87 to $7.13, Research, Estimates) joined the rally.
Other Dow winners were aerospace companies Boeing (BA: up $2.34 to $36.59, Research, Estimates), United Technologies (UTX: up $2.11 to $51.07, Research, Estimates), Honeywell International (HON: up $1.30 to $26.95, Research, Estimates), and diversified manufacturer 3M (MMM: up $2.38 to $99.59, Research, Estimates).
Online discount travel retailer Priceline.com (PCLN: up $0.34 to $4.01, Research, Estimates) said third-quarter revenue should come in at the high end of its previous guidance, which was a range of $280 million-to-$300 million. Analysts were expecting $287 million. More encouragingly, the company said demand for its travel products is recovering faster than it had expected.
Mortgage applications rose in the Sept. 28 week, with applications for new purchases rising 8.9 percent and the refinancing index rising 27.5 percent, according to Briefing.com, helping homebuilders such as Centex (CTX: up $3.14 to $36.75, Research, Estimates) and Lennar (LEN: up $2.50 to $37.48, Research, Estimates), which said late Tuesday that new home orders were better in late September.
Retailers such as Men's Warehouse (MW: up $1.20 to $20.00, Research, Estimates) and Tiffany & Co. (TIF: up $2.82 to $23.58, Research, Estimates) rose despite issuing quarterly results warnings, within a broader retail rise.
Lily, Nortel issue warnings
On the down side were the effects of corporate warnings that came in prior to the open of trade.
"We've got a market that is slowly finding its ground," said Bryan Piskarowski, market commentator at Prudential Financial. "The Federal Reserve gave us what we wanted yesterday (Tuesday), but we still are fighting an uphill battle every day as corporate warnings come in."
Drugmaker Eli Lilly (LLY: down $3.62 to $79.25, Research, Estimates) warned about its fourth quarter and all of 2002, blaming weak sales of its Prozac anti-depressant drug due to generic competition.
Lilly sent a chill through the pharmaceutical sector. Merck (MRK: down $0.78 to $67.66, Research, Estimates) weighed down the Dow, while Pfizer (PFE: down $0.25 to $41.25, Research, Estimates) and Bristol-Myers Squibb (BMY: down $1.25 to $56.75, Research, Estimates) also slipped on the news.
Telecom and optical networking stocks were big losers all morning after Nortel Networks and Digital Lightwave both issued quarterly results warnings.
But Nortel (NT: up $0.25 to $5.54, Research, Estimates) rallied, despite saying it expects to report a third-quarter loss of 28 cents a share – a much wider loss than the 21 cents analysts were expecting – and that it will cut more jobs. Nortel's rebound took some pressure off telecoms, which had been down in early morning.
Digital Lightwave (DIGL: down $3.62 to $5.40, Research, Estimates), a fiber-optic networking services provider, warned that it will see a third-quarter loss of 9 cents-to-10 cents per share when analysts had expected a profit of 19 cents per share.
Communications infrastructure software maker Openwave Systems (OPWV: down $4.42 to $6.64, Research, Estimates) warned about its fiscal first quarter, saying it sees a loss of 1 cent-to-4 cents per share, rather than the 9 cents a share profit analysts had expected.
Natus Medical (BABY: down $4.91 to $4.00, Research, Estimates), a maker of monitors for the detection of common disorders in babies, said late Tuesday that it will miss estimates in the third-quarter and full-year 2001.
Homestore.com (HOMS: down $0.85 to $6.20, Research, Estimates), which provides online real estate listings, warned that its third quarter would come in short of estimates. 
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