The Dow Jones industrial average shrugged off an early 26-point deficit and then rallied into the close, jumping back above the 7,000-mark with a gain of 76.58 points to close at 7,008.20. More than half of the blue-chip barometer's advance came from big gains in Philip Morris, IBM and Merck.
Advancers outnumbered decliners by a 7-to-5 margin on the New York Stock Exchange, with 1,508 up, 1,067 down and 799 unchanged.
NYSE volume totaled 459.91 million shares vs. 487.08 million in the previous session.
The Standard & Poor's 500-stock list rose 8.51 to 810.28, and the NYSE composite index rose 3.47 to 424.48.
The Nasdaq composite index rose 10.93 to 1,345.25, and the American Stock Exchange composite index rose 0.78 to 598.07.
The two most active Nasdaq issues were Cisco and Intel, which pulled into positive territory in the last hour after early losses.
Microsoft, Dell Computer and U.S. Robotics also rose sharply in Nasdaq trading. On The NYSE, meanwhile, Micron Technology rallied as the most active issue.
The gains in stocks came despite a weak bond market, where the yield on the 30-year Treasury bond - a key determinant of corporate and consumer borrowing costs - rose as high as 6.67 percent from late Friday's 6.64 percent. Later, the yield edged back to 6.65 percent.