Stocks staged a stunning rebound yesterday as investors snapped up shares on unexpectedly strong earnings and the surprising news that the...

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NEW YORK — Stocks staged a stunning rebound yesterday as investors snapped up shares on unexpectedly strong earnings and the surprising news that the New York Stock Exchange plans to merge with electronic trader Archipelago.

The Dow surged 206.24 to 10,218.60, reversing course after a 115-point drop Wednesday, and a 374-point decline last week. It was the Dow’s largest one-day gain since April 2, 2003, when the blue chips closed 215.20 points higher.

Microsoft, one of the 30 Dow stocks, gained 96 cents to close at $25.28. Boeing, also a Dow stock, soared $1.85 to $59.08.

The broader gauges also posted significant advances. The Nasdaq composite index soared 48.65 to 1,962.41, its best one-day gain since Nov. 24, 2003, when it closed up 53.26 points.

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The Standard & Poor’s 500 index added 22.45 to 1,159.95, its best one-day showing since March 17, 2003, when it climbed 29.52.

Bargain-minded buyers jumped back in a day after concerns about inflation sent stocks sharply lower. Yesterday’s session began with brisk trading, which some analysts worried wouldn’t last. But with money flowing out of bonds, Wall Street grew more confident about the prospects for equities after last week’s heavy losses.

“Obviously, the market is oversold when you get multiple days of 100-point sell-offs,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

“I think the market got flushed out … everybody was frightened,” he said. “When everyone starts seeing the glass as half-empty, it’s just panic in the streets. But once we get through earnings, I just see nothing but gradual upside for the rest of ’05.”

Stocks recovered from a decline in which the Dow came within 1 point of falling below 10,000.

Wednesday’s losses followed data on consumer prices that heightened concern that the Fed may step up the pace of interest-rate increases.

“We’re seeing some really good values out there,” said Chris Matlock, chief investment officer at Lighthouse Capital Management in Houston. “We have earnings that are growing, and the economy can continue to muddle along. It’s growth that works pretty well for stocks.”

Despite the day’s robust trading, however, some analysts were reluctant to declare an end to the slide that started last week, warning that the market has had a hard time sustaining rallies.

“The market is still jittery,” said Jay Suskind, head trader at Ryan Beck. “You’re seeing strong earnings numbers, there’s good visibility on the corporate side, but lousy macroeconomic numbers for March, and that’s the big quandary.

“I think we need really another month or so of macro numbers to know whether March was just an economic soft patch or not.”

The number of Americans filing new claims for unemployment benefits plunged by 36,000 last week, the biggest drop in more than three years.

Labor Department analysts cautioned that the drop was overstated, however, because the normal seasonal adjustments used to calculate claims was skewed by the early Easter holiday.

Separately, a closely watched index forecasting future business activity fell in March, a sign economic growth may be slowing. The composite Index of Leading Economic Indicators fell 0.4 percent last month to 115.1, according to the Conference Board. Economists had expected a 0.3 percent decline.

All areas of the market posted gains, according to the exchange-traded funds that track the nine sectors of the S&P.

The top performers were energy, which rose 3.45 percent; industrials, up 2.67 percent; and technology, up 2.7 percent. The weakest were utilities, up 0.89 percent; and financials, which rose 0.58 percent.

Archipelago rocketed higher, up 59.7 percent, or $11.20, at $29.96 on the Pacific Stock Exchange, a day after the New York Stock Exchange announced plans to merge with its all-electronic rival exchange.

The move, which took Wall Street by surprise, will transform the NYSE into a for-profit, publicly traded enterprise.

Nokia gained 6.6 percent, or $1.01, to $16.35, after reporting double-digit growth in the first quarter and raising its earlier estimate of the global mobile handset market in 2005.

Its rival, Motorola, also had better-than-expected results on a solid rise in sales; Motorola was up 6.7 percent, or $1 at $15.93.

Information on how close Dow came to 10,000 and Matlock quote provided by Bloomberg News.