CHICAGO (CNN/Money) - Technology stocks regained their momentum Tuesday, fueled by renewed enthusiasm in the Internet sector and persistent strength in semiconductors.

The Nasdaq Composite Index jumped 46.60, or 3 percent, to 1,556.69, according to preliminary results.

Among blue chips, Microsoft (MSFT: Research, Estimates) advanced 57 cents to $24.79, Dell Computer (DELL: Research, Estimates) gained 52 cents to $30.01, and IBM (IBM: Research, Estimates) climbed $2.42 to $87.68.

The broad-based rally began after the release of better-than-expected reports on the housing sector and consumer confidence. Buoyed by hopes that the economy will continue to improve, buyers rushed back to the market.

Solid gains in Internet stocks brought back memories of 1999. Strong earnings, good press, and the prospect of a permanent ban on Internet sales taxes have helped propel the sector.

Yahoo! (YHOO: Research, Estimates), which is the subject of a glowing cover story in the current issue of BusinessWeek, moved up $1.48, or 5 percent, to $29.97, a new 52-week high.

Other Internet stocks hitting 52-week highs included eBay (EBAY: Research, Estimates), up $3.61 to $103.05, Amazon.com (AMZN: Research, Estimates) up $2.13, or 6.5 percent, to $34.85, and USA Interactive (USAI: Research, Estimates), up $1.29 to $37.10.

The Goldman Sachs Internet Index gained 5.12, or 4.5 percent, to 117.61.

"The overall passion for Internet stocks is carrying over to the index itself," said Art Hogan, chief market strategist for Jefferies & Co.

Although stock watchers have noted that valuations are getting stretched, which has led to several stock downgrades, Hogan believes there's still enough momentum behind the tech sector to continue moving upward.

"I think there's more room for upside," he said. "Coming out of a bear market, technology tends to lead the way."

Semiconductor shares, which have been at the forefront of the tech rally, posted strong gains. The Philadelphia Semiconductor Index jumped 20.99, or 6 percent, to 365.34. The index is up 26.3 percent for the year.

Among individual chip issues, Intel (INTC: Research, Estimates) climbed 97 cents to $19.78, Applied Materials (AMAT: Research, Estimates) finished 85 cents higher at $14.69, and Xilinx (XLNX: Research, Estimates) gained $1.00 to $29.55.

Not everyone got to participate in the rally. Research In Motion (RIMM: Research, Estimates), maker of the popular BlackBerry wireless e-mail device, dropped $1.28, or 6 percent, to $18.74 after J.P. Morgan downgraded the stock to "underweight" from "neutral" following an unfavorable ruling in a patent infringement suit.

AT&T (T: Research, Estimates) fell 34 cents to $18.91 after the long-distance giant reached an agreement to resell wireless telephone services offered by AT&T Wireless, which AT&T spun off last year. A.G. Edwards downgraded AT&T to "sell" from "hold."

AT&T Wireless (AWE: Research, Estimates) shares gained 3 cents to $7.67.