NEW YORK (CNN/Money) - Rallies in Procter & Gamble, Honeywell and General Motors sent the Dow Jones industrial average to its highest close of the month Wednesday as investors, encouraged by a U.S. peace-keeping mission to the Middle East, returned to some of the year's best-performing stocks.

The Nasdaq composite index also rose but more modestly as concerns about the health of technology spending persisted.

The Dow industrials advanced 173.06 points, or 1.7 percent, to 10,381.72. Its best finish since March 28 widened the Dow's 2002 gain to 3.6 percent. The Nasdaq rose 24.50, or 1.4 percent, to 1,767.07, narrowing its year-to-date loss to 9.4 percent. The Standard & Poor's 500 index gained 12.66 to 1,130.46.

Secretary of State Colin Powell agreed to meet Palestinian Authority President Yasser Arafat later this week in an effort to bring some stability to the Middle East region.

"You've got bargain hunting among the blue chips on the promise that the U.S. may be able to contain the violence in the Middle East," said Alan Ackerman, market strategist at Fahnestock & Co.

The Dow, the only major index higher this year, fell for a third straight week Friday. But energy prices have been declining since then, a trend that may cut costs and lift profits for corporations.

"I think it's bottom-fishing from an oversold condition," Ackerman said of the day's gains.

More stocks rose than fell in heavy trading volume. On the New York Stock Exchange, winners topped losers more than 2-to-1 as 1.4 billion shares traded. Nasdaq advancers beat decliners 4-to-3 as 1.9 billion shares changed hands.

In other markets, the dollar slipped against the yen and steadied versus the euro. Treasury securities fell and crude oil prices ended little changed.

The session's gains mark a reversal from earlier this week when IBM, Nortel Networks, and Verizon Communications all cut forecasts. But upbeat news came from Sears Roebuck Wednesday. The retailer said first-quarter profit would surge past analysts' forecasts, joining at least five other companies pre-announcing upside surprises.

"Every time the market pulls back, people come back into the market," David Briggs, head trader at Federated Investors, told CNNfn's Street Sweep. "I think the real driver is there's no return holding cash."

Among the other Dow gainers, Caterpillar (CAT: up $1.61 to $59.49, Research, Estimates) declared a quarterly cash dividend of 35 cents per share on its common stock, payable May 20, maintaining the dividend rate set for the previous quarter.

Procter & Gamble (PG: up $2.21 to $92.34, Research, Estimates) also lifted the Dow. The maker of Crest toothpaste and Tide detergent named the current president and CEO, A.G. Lafley, to the added post of chairman. Fellow Dow stock Eastman Kodak (EK: up $1.87 to $34.30, Research, Estimates) rose for a second day on an upgrade from Salomon Smith Barney.

General Motors (GM: up $2.03 to $62.48, Research, Estimates), which began the year at $48.60, continued its run.

Sears Roebuck (S: up $2.98 to $54.18, Research, Estimates) pre-announced a major upside surprise Wednesday, saying first-quarter profit will come in at 93 cents a share, well above forecasts for 61 cents. Gains spread to Dow component retailers Home Depot (HD: up $0.66 to $49.74, Research, Estimates) and Wal-Mart (WMT: up $0.47 to $60.57, Research, Estimates).

In raising forecasts, Sears joined Sherwin-Williams (SHW: up $0.25 to $29.60, Research, Estimates), Cooper Tire (CTB: up $2.13 to $23.15, Research, Estimates) and Asbury Automotive (ABG: up $2.60 to $18.00, Research, Estimates), which upped profit forecasts Wednesday.

Nasdaq's most actively traded stock, WorldCom (WCOM: down $0.66 to $4.77, Research, Estimates), fell 12 percent. Heavy debt and slowing sales have hurt telecommunications stocks this year. Rival AT&T (T: down $0.59 to $14.42, Research, Estimates), the Dow's biggest loser, filed for a 1-for-5 stock split.

"We continue to have more and more bad news on telecom," Mark Donahoe, trader at U.S. Bancorp Piper Jaffray, told CNNfn's Halftime Report.

Oracle (ORCL: down $0.43 to $11.55, Research, Estimates) was also among Nasdaq's losers. The software maker's chief executive, Larry Ellison, said he was assuming corporate technology spending wouldn't get better in the next three months, Reuters reported.

Software maker Siebel Systems (SEBL: down $2.12 to $25.44, Research, Estimates) tumbled more than 7 percent. SoundView Technology cut the company's price target on the stock and lowered estimates

Research In Motion (RIMM: down $3.07 to $20.19, Research, Estimates), which makes mobile communications products, said late Tuesday that current-quarter results will be weaker than previously expected. American Eagle Outfitters (AEOS: down $0.46 to $24.50, Research, Estimates), a specialty retailer, said first-quarter profit will fall short.

Merrill Lynch and UBS Warburg came to the defense of Cisco Systems (CSCO: up $0.73 to $15.55, Research, Estimates), whose shares fell more than 8 percent Tuesday amid concerns its quarterly profit would fall short as customers cut communications spending.

"We do not believe Cisco will pre-announce a shortfall for the April quarter," Nikos Theodosopoulos, who covers the company for UBS Warburg, told clients.

Yahoo! (YHOO: down $0.02 to $18.44, Research, Estimates) ended little changed ahead of its first-quarter profit report due after the closing bell. Analysts expect the Web portal to have earned 2 cents a share, double the 1 cent per share recorded a year earlier.

After Yahoo, a deluge of companies report March-quarter results next week and may offer details about current quarter business. Elsewhere, questions remain about whether Middle East violence will disrupt the flow of oil. But that worry faded for a day.

"Right now there's nothing too, too bad to focus on," Linda Jay, trader at LaBranche & Co, told Market Call. "As long as things stay calm in the Middle East, I think this (gain) continues."