NEW YORK (CNNfn) - The Nasdaq composite index bolted nearly 180 points higher Tuesday as investors snapped up beaten-down tech issues, betting that bargains were to be found, and that the worst is over for the sector.
"All in all, it's been a bad month for technology, but not so bad for other sectors. Today, we have a nice rally on Nasdaq and I'm not sure if this is a trick or a treat," said Peter Cardillo, director of research at Westfalia Investments. "I think it's not a trick because I think the worst is over and the market is setting itself up for a nice rally."
 The Nasdaq surged 178.15 points, or more than 5 percent, to 3,369.55. The gain was the ninth-biggest ever for the tech-laden index, both in points and percentage terms. For the month, the index is still down 8.2 percent.
At the same time, the Dow Jones industrial average gained upward momentum to close sharply higher for the fourth straight session, despite selling in Procter & Gamble after an earnings report.
 The Dow soared 135.37 to 10,971.14, putting the blue chip index within 30 points of crossing the 11,000 mark, which it hasn't seen since mid-September. The blue chip index fared better during October, ending the month up 2.9 percent, and gaining more than 600 points during its previous four sessions.
The S&P 500 advanced 30.73 to 1,429.39 and ended the month off just 0.5 percent.
Some selling over the previous sessions had come into play to offset some of the large capital gains that fund managers had taken earlier in the year, analysts said. With equity mutual funds facing the end of their tax year Tuesday, most, if not all, of the tax-loss selling has been completed.
"Whether the catalyst was the cessation of tax selling or just a rally from a truly depressed area, the Nasdaq is attracting some bargain hunting," said Ned Riley, chief investment strategist at State Street Global Advisors. "I would suggest stocks were over discounting shorter-term problems that have already been announced."
Market breadth was positive. On the New York Stock Exchange advancers beat decliners 2,058 to 886, as more than 1.3 billion shares changed hands. Winners topped losers 2,766 to 1,259, on the Nasdaq as more than 2.1 billion shares were traded.
Treasurys were mixed. The dollar fell against the euro but was little changed versus the yen.
Techs are treats for Nasdaq
Investors poured money back into tech stocks, believing the beleaguered issues in the sector had reached reasonable prices.
"I just think it's an extremely oversold condition that hammered the techs and they are due for a bounce," said Brian Finnerty, head of Nasdaq trading at C.E. Unterberg Towbin. "The battle is being waged over how much should be paid for these companies."
State Street's Riley said the sentiment has turned, as investors now believe that valuations are at more reasonable levels. "Today we're in the bottom- fishing mode and there are a lot of people who think the tech correction is complete and we've established our lows for this cycle," he said.
 Cisco Systems (CSCO: Research, Estimates) gained $5.69 to $53.88, Oracle (ORCL: Research, Estimates) rose $1.38 to $33, and Applied Materials (AMAT: Research, Estimates) advanced $3.50 to $53.13.
Corporate results from Internet companies also helped give the Nasdaq a boost.
Travel Web site Expedia (EXPE: Research, Estimates) jumped $3.75 to $12.81 after it reported a fiscal first-quarter loss that was far narrower than anticipated by Wall Street, but warned that increased spending would widen its operating loss in the quarter ending in December.
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Corporate news drives Dow's rise
After a slow start, the Dow resumed a rally that has seen a nearly 5 percent advance over the prior three sessions.
The gains occurred despite laggard Procter & Gamble (PG: Research, Estimates) , which slumped $5.44 to $71.44 after saying it earned 88 cents a share for the latest quarter excluding one-time items, in line with Wall Street forecasts. Sales at the maker of Ivory soap and Pampers diapers were little changed at about $9.9 billion.
"The Dow is still going to attract because investors still want to diversify away from a purely tech portfolio and find value," State Street's Riley said.
But Westfalia's Cardillo cautioned that the rotation away from technology stocks and into "old economy" issues was likely to slow down, as data continue to signal a cooling economy.
"If growth slows to the point where it might begin to affect corporate earnings in 'old economy' stocks as it has in the past, then I suspect that a lot of the money will rotate back into technology stocks," he said.
The Dow's leading gainer, International Business Machines (IBM: Research, Estimates), rose $5.19 to $98.50. The company announced a major services agreement Tuesday with Japanese telecom NTT that gives the world's No. 1 computer maker a boost in telecom services in Asia. IBM also initiated a $3.5 billion stock buyback.
AT&T (T: Research, Estimates) gained 56 cents to $23.19. The company is seeking a $25 billion commitment from a handful of big financial institutions to create what would be one of the biggest credit facilities of its type ever arranged, according to a published report.
 While money was moving back into technology, investors were still betting that select "old economy" issues would provide safe havens for their money.
J.P. Morgan (JPM: Research, Estimates) and General Motors (GM: Research, Estimates) also attracted buyers. J.P. Morgan soared $6.13 to $165.50 while GM jumped $2.25 to $62.13.
Eyes on the election
Investors were also considering the national presidential election, which takes place in exactly one week. The latest CNN/USA Today/Gallup three-day tracking poll shows Texas Gov. George W. Bush's lead over Vice President Al Gore narrowing to 3 percentage points, 47-44; Bush was ahead by 7 points in the prior poll.
Jim Waggoner, market and technology strategist for Sands Brothers & Co., told CNNfn's Market Call that the close election makes it difficult to place any investment "bets" on the outcome. (397K WAV) (397K AIFF)
And Westfalia's Cardillo said the markets were poised to rally once the election was out of the way. "After election day, the market is going to assess the political and economic outlook resulting from the election and that should set the stage for a nice year-end rally," he said.
Among the day's economic indicators, new home sales surged 9.2 percent in September to an annual rate of 946,000, the government said. That's well above the 900,000 rate expected by analysts surveyed by Briefing.com and August's revised 866,000 level.
Separately, the Consumer Confidence Index fell to 135.2 in October, the Conference Board said. The figures was well below forecasts of 140.0 and last month's 142.5 level. 
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