NEW YORK (CNNfn) - A hint that the Federal Reserve could cut interest rates to fend off damage to the U.S. economy from the global market rout sent stocks on Wall Street soaring Tuesday as investors returned from a three-day weekend with an upbeat attitude.
Shortly before 1:30 p.m. the Dow Jones industrial average surged 209.32 points, or 2.7 percent, to 7,849.57. Earlier in the day, the Dow rose as much as 307 points. Advances trounced declines 2,369 to 684 as 490 million shares traded on the New York Stock Exchange.
The Nasdaq Composite roared 60.36 points ahead, or 3.8 percent, to 1,626.88, powered by soaring technology and Internet shares. The broad S&P 500 index gained 25.15, or 2.5 percent, to 999.04. The Russell 2000 index of small cap stocks climbed 11.11, or 3.2 percent, to 358.18. (Click here for a look at today's CNNfn market movers.)
Wall Street's rally came as the market got its first opportunity to react to a late Friday speech by Fed Chairman Alan Greenspan, which many in the market interpreted as suggesting lower interest rates could be in store soon.
Speaking about the impact of the global economic turmoil on U.S. growth, Greenspan said the U.S. economy would not remain unscathed while the rest of the world is facing a slowdown. He also said the Federal Open Market Committee, the Fed's policy-making body, would have to consider carefully all the developments since the Fed's last policy meeting in August. This statement led many market watchers to believe that the Fed would be open to the possibility of easing interest rates. The FOMC's next meeting is scheduled for Sept. 29.
Greenspan's words and the market's powerful surge opened the door for Wall Street bulls, who had been silenced in the past few weeks as the Dow fell more than 18 percent from its all-time high in July.
"Our economy is doing well despite what is going on in Asia, and with any signs of improvement from there, it could be up, up and away for us," said Al Goldman, chief market strategist at A.G. Edwards, who sees the Dow reaching 10,000 around the first quarter of 1999.
The stock market's robust rally sapped the strength out of bonds, driving the benchmark 30-year Treasury bond down 25/32 of a point in price and raising its yield to 5.33 percent.
The dollar eased from its overnight highs against the German mark and the Japanese yen as investors shifted their focus from the rallying stock market to the long-term negative impact on the currency from a possible interest-rate cut.
Techs, banks flying high
In stocks, once again technology and banking shares led the way. The two high-profile sectors suffered the worst losses in the market's tumbles during the past few weeks, and were quick to soar ahead of the crowd in Tuesday's comeback.
Both sectors have relatively high exposure to international markets, and their earnings have suffered because of the Asian, Russian and emerging markets crises. But stronger markets overseas are likely to mean better business for technology powerhouses and lower interest rates at home would boost the banks' performance.
Among the leaders, Dell Computer (DELL), whose shares split 2-for-1 at the market close Friday, surged 3-1/2 to 58-1/4, Microsoft (MSFT) jumped 2-5/8 to 99-1/4 and Intel (INTC) rallied 1-3/4 to 80. Dow member IBM (IBM) climbed 3-5/8 to 123.
Among the financial components of the Dow industrials, J.P. Morgan (JPM) surged 2-13/16 to 89-3/4, Travelers (TRV) climbed 2-3/4 to 41-13/16, and American Express (AXP) leaped 3-7/16 to 77-1/16. Other financial gainers included Citicorp (CCI), rising 6 to 98-1/2 and Chase Manhattan (CMB), climbing 11/16 to 46-1/16.
Brokerage stocks also joined the party, with Morgan Stanley Dean Witter (MWD) rising 3-5/16 to 53-9/16, Lehman Brothers (LEH) climbing 2-5/8 to 40-11/16 and Merrill Lynch (MER) surging 2-1/4 to 63-15/16.
Finally, Internet shares, among the market's most-volatile performers and also a sector that was hard hit in the sell off of the last two weeks, rebounded with a vengeance. Search engine Yahoo! (YHOO) rallied 5-1/8 to 80-1/2. Rival Excite (XCIT) soared 2-3/8 to 28-1/4 and Infoseek (SEEK) jumped 2-1/16 to 19-3/16. Online service provider America Online (AOL) gained 6-11/16 to 92-11/16 and online book retailer Amazon.com (AMZN) rose 5-3/8 to 91-5/8. 
-- by staff writer Malina Poshtova Zang
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