As Al Goldman of A.G. Edwards said, "Anybody who isn't impressed doesn't have a pulse."
The Dow Jones industrial average rose 499.19 points, or 4.9 percent, to close at 10,630.60, according to preliminary figures.
The previous record one-day gain by the Dow was 380 points on September 8, 1998.
It was not near a record for the biggest daily percentage gain, however.
The modern era record for percentage gain in a day was the 10 percent jump the Dow posted after the 1987 crash. The all time record was set in 1931, when a mere 12-point rally sent the Dow up nearly 15 percent.
The Nasdaq composite index, which closed last Friday at a record 5,048.62, was up 134.67, or 2.9 percent, at 4,717.29, according to preliminary figures, after being down as much as 127 earlier in the day.
At the depths of its decline Thursday, the Nasdaq was down 11.8 percent from last Friday. With its recovery later in the day Thursday, its decline was 6.6 percent.
A drop of more than 10 percent is considered a signal of a correction, or downturn in a rising market.
While Nasdaqs rise was a shift from bad fortunes earlier this week, the Dows overwhelming success continued a week-long trend of investors returning to stocks they shunned earlier in the year.
Companies like General Electric, American Express, Johnson & Johnson and 3M led the Dow higher Thursday.
Even with its unprecedented two-day rally, the Dow remained 9.3 percent and 1000 points below its Jan. 14 record of 11,722.98.
Analysts say that when the tech stocks of the previously red-hot Nasdaq took a 10 percent free-fall this week, money headed back to the blue chips.
"The triggering element was the buckling of the biotechs, the buckling of the Nasdaq, and the awareness of how risky those stocks had become," said Prudential's Larry Wachtel.
In addition, hints the economy may be slowing are encouraging some on Wall Street to gamble that Federal Reserve Board Chairman Alan Greenspan may put a lid on interest rate hikes.
Released Thursday, the Labor Department's Producer Price Index showed that wholesale prices surged 1 percent in February. It was the largest gain in nearly 10 years, and was caused by increases in gasoline, home heating oil and other energy costs.
Inflation figures, including the Consumer Price Index due for release Friday, are sure to be used by the Federal Reserve as evidence that still higher interest rates are needed to cool the economy. The Fed has raised rates four times since last June, and it meets again Tuesday. Investors are expecting a fifth rate hike.
Still, investors were heartened by the fact that the "core" rate f inflation at the wholesale level, which excludes the volatile energy and food categories, matched expectations with a 0.3 percent gain in Thursday's report.
"It's just that investors finally realized that Greenspan is not mean spirited. He does not want to destroy the economy," said Goldman. "He does not want a bear market under his watch and that he's not gonna raising interest rates to cripple interest rates to cripple business."
"That's the bet that's being made. Now maybe it's the wrong bet," said Wachtel. "And if it's the wrong bet you'll lose. But if it's the right bet you'll win. And this is not a science, it's an art."
Volatility Thursday was magnified because it is the eve of a "triple-witching'' session, a once-a-quarter event when contracts on stock options, index options, and index futures all expire. Those expirations generally cause increased gyrations on Wall Street.
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