Wall Street up on Cisco Earnings

NEW YORK - Stocks surged Wednesday as solid results in the technology arena further soothed investors a day after the Federal Reserve assured them the economy should keep growing moderately.

The Dow Jones industrial average soared more than 120 points. The Nasdaq composite index and Russell 2000 index -- which include technology companies and small-cap stocks -- made strong percentage gains.

Computer network equipment maker Cisco Systems Inc. (NASDAQ:CSCO) said its quarterly profit jumped 25 percent and raised its revenue forecast for the year. The earnings report arrived late Tuesday along with Time Warner (NYSE:TWX) Telecom Inc.'s (NASDAQ:TWTC) announcement that it posted a narrower second-quarter loss than Wall Street anticipated.

The upbeat technology news, along with strong recoveries in the beleaguered financial and homebuilding sectors, came a day after the Federal Reserve said that despite an increasingly difficult credit environment, the economy should keep growing moderately.

'Basically, the Fed's telling us we're back to business as usual,' said John C. Forelli, portfolio manager for Independence Investment LLC in Boston.

In mid-afternoon trading, the Dow rose 129.25, or 0.96 percent, to 13,633.55, staying positive throughout the session. The last time the Dow traded only in positive territory was July 23. Since then, it had been swinging up and down wildly on worries that borrowing would get tougher because of losses in the subprime mortgage market.

The Standard & Poor's (NYSE:MHP) 500 index rose 21.19, or 1.15 percent, to 1,493.72.

The Nasdaq added 57.95, or 2.26 percent, to 2,619.55.

The Russell 2000 index gained 26.59, or 3.43 percent, to 800.72. The index of smaller companies had dipped in late July into negative territory for the year, battered as credit crunch worries led investors to turn to larger, more established companies. Now, the Russell is back in positive terrain for the year.

'People are getting some appetite for risk again,' Forelli said.

Bonds plummeted as stocks rose, with the yield on the 10-year Treasury note rising to 4.88 percent from 4.77 percent on Tuesday. Investors exited the government securities after the Fed's statement Tuesday dashed hopes of a rate cut, and on rumors that Asian governments would get rid of some of their U.S. assets.

The financial and homebuilding sectors -- big losers in recent weeks -- saw large gains Wednesday. The return of money to these pummeled stocks suggested that investors are perhaps less concerned now about subprime lending problems spreading and crippling the broader economy.