NEW YORK (CNN/Money) - An upbeat profit report from Cisco Systems helped propel U.S. stocks to their best gain of the year Wednesday amid hopes that spending on new technology has finally bottomed.

Gains spread far beyond tech stocks. General Electric, the world's biggest company by market value, jumped 7 percent amid assurances its earnings are on track. And financial stocks also rallied.

Burned by years of head-fake rallies, many investors doubt the gain has legs. But Wednesday's rally stirred memories of 1999, when the Nasdaq composite index rose a record 85.6 percent before falling over the next two years.

The Nasdaq surged 122.47 points, or 7.78 percent, to 1,696.29, its eighth-best percentage gain of all time. The Dow Jones industrial average rose 305.28, or 3.1 percent, to 10,141.83, wiping out its loss for the year.

The Standard & Poor's 500 index advanced 39.36, or 3.7 percent, to 1,088.85, narrowing its 2002 decline to 5.2 percent.

Fiscal third-quarter profit at Cisco (CSCO: up $3.19 to $16.27, Research, Estimates) nearly quadrupled, topping forecasts by 2 cents a share, as the communications equipment maker cut costs amid a slight rise in sales.

Cisco jumped more than 24 percent on volume that topped 193 million shares, taking other tech stocks higher amid hopes that businesses are once again buying communications equipment.

Linda Jay, a New York Stock Exchange specialist with LaBranche & Co., expects markets to rise further as investors who incorrectly sold stocks short are forced to buy them back.

"We could go higher, a lot higher," Jay told CNNfn's Market Call. She called Cisco's report "the first glimmer of hope we've seen in this industry."

More stocks rose than fell in active trading. On the NYSE, advancing stocks topped declining ones nearly 2-to-1 as 1.4 billion shares traded. Nasdaq winners beat losers more than 2-to-1 as 2.3 billion shares changed hands.

Investors buying stocks fled Treasury securities, sending yields higher. But the dollar benefited, rising against the euro and yen.

Looking forward, Cisco said it doesn't see a speedy pickup in orders for Internet networking gear. But that didn't keep the gains from spreading to rivals Juniper Networks (JNPR: up $1.19 to $9.62, Research, Estimates), Foundry Networks (FDRY: up $0.77 to $5.63, Research, Estimates) and Extreme Networks (EXTR: up $2.23 to $9.66, Research, Estimates).

At least five brokerages upped financial guidance for Cisco, which was briefly the world's most valuable company when its shares traded above $80 two years ago.

Gains in technology stocks also lifted the Dow as investors poured into Microsoft (MSFT: up $5.50 to $54.97, Research, Estimates), IBM (IBM: up $6.10 to $82.45, Research, Estimates) and Intel (INTC: up $2.83 to $28.98, Research, Estimates).

"That has helped the techs today (Wednesday)," Alan Ackerman, chief market strategist at Fahnestock & Co., said of Cisco. "They have a reasonably upbeat forecast."

General Electric (GE: up $2.20 to $32.85, Research, Estimates) also had good profit news. The conglomerate reaffirmed its expectations for double-digit earnings growth this year and next. Financials J.P. Morgan (JPM: up $2.28 to $36.91, Research, Estimates) and Citigroup (C: up $2.62 to $44.77, Research, Estimates) rose as well.

Fahnestock's Ackerman said investors also may be encouraged by reports that Merrill Lynch (MER: up $3.31 to $43.95, Research, Estimates) is near settlement with the New York state attorney general over charges analysts deceptively hyped stocks to win business for Merrill's investment banking unit.

He also cited delayed reaction to Federal Reserve signals that interest rates will stay at 40-year lows until at least August.

But Ackerman was reluctant to forecast any sustainability to the gains amid a market that has disappointed investors for two years. "For now, this may just be a rally from an oversold condition," he said.

David Katz, chief investment officer at Matrix Asset Advisors, was upbeat, forecasting a recovery in business spending and hiring.

"People are looking for good news and, as they start seeing it, you're going to see more of these rallies," Katz said. "Businesses are going to start spending one day and they are going to start hiring one day."

Still, Katz has questions about timing the business cycle's upturn a day after the Federal Reserve raised similar concerns.

The Fed left interest rates unchanged Tuesday for its third straight meeting in an ongoing effort to maintain consumer spending and coax businesses to buy new equipment.

Fed policy makers voiced concern that the sustainability of any expansion "is still uncertain," hinting that borrowing costs won't go higher any time soon.

Economists don't expect higher short-term rates until at least August.

Even with Wednesday's gains, the Nasdaq is still down 13 percent on the year. Stocks have recouped only about a week of losses. And the upturn could prove fleeting if investors, chastened by a series of short-lived rallies, cash in the advance.

Three of Nasdaq's four biggest one-day gains on record occurred in 2001, a year when the index fell 19 percent.