Stocks Rally Into Close

The averages gain about 1%.
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Updated from 3:37 p.m. EST

The major averages bounced back from some rough sessions Wednesday as a bright outlook at

Cisco

(CSCO) - Get Report

brought bulls back into stocks.

The

Dow Jones Industrial Average

rose 109 points, or 1%, to 10,859, and the

S&P 500

gained 11 points, or 0.9%, to 1266. The

Nasdaq Composite

rose 22 points, or 1%, to 2267.

The 10-year Treasury bond was down 4/32 in price to yield 4.58%, while the dollar rose against the yen and euro.

Crude extended a decline after plunging more than $2 a barrel Tuesday. In Nymex trading, the March contract ended down 54 cents at $62.55 a barrel. Oil fell even after the Energy Department reported that crude inventories dropped by 300,000 barrels last week. Analysts had been expecting a 300,000-barrel build in stores.

Gasoline stocks rose by 4.3 million barrels, more than twice the expected 1.9 million-barrel addition. Distillate inventories fell by 300,000 barrels.

Though corporate earnings season is winding down, a few big names are still providing numbers to Wall Street. Among them was Cisco, which said its second-quarter earnings fell 2% from a year ago to $1.38 billion, or 22 cents a share, reflecting a stock-options expense.

Adjusted earnings of 26 cents a share were a penny ahead of estimates, while sales of $6.36 billion matched estimates. CEO John Chambers said on a post-earnings conference call that second-quarter orders rose in the midteens, higher than expected, and the router maker left guidance for the third quarter intact.

Shares of Cisco added 7.2% to $19.40. Cisco has traded in a tight range during the last year, staying between $16.83 and $20.25.

Another networker making headlines was

Nortel

(NT)

. The Canadian telecom-equipment maker said it's offering to pay $2.5 billion in cash and stock to settle the class-action lawsuits that followed the company's financial scandals of recent years. Nortel said it will pay $575 million in cash and issue 629 million shares, representing a 14.5% stake in the company, to settle the suits.

The company would take a charge of 57 cents a share to cover the costs of the settlement. Shares of Nortel lost 1.3% to $2.98.

To view Gregg Greenberg's video take on today's market, click here

.

IAC/InterActiveCorp

(IACI)

said it earned $113 million, or 33 cents a share, in the fourth quarter, reversing the year-ago loss of $46 million, or 13 cents a share. Adjusted earnings were a nickel ahead of views and the online company set a 42 million-share buyback. IAC shares rose 1.3% to $28.01.

Billionaire investor Carl Icahn laid out his long-awaited vision for

Time Warner

(TWX)

Tuesday night, recommending the company be split into four separate companies in an effort to unlock value. Icahn and several hedge fund allies control about 3.3% of the media company's shares. Time Warner executives told shareholders that they plan to stick to their current strategy. Shares slipped 18 cents to $18.54.

Another company where an asset separation is reportedly on the table is

Pfizer

(PFE) - Get Report

. Reports Wednesday said the drug giant is weighing the sale or spinoff of its over-the-counter drugs operation, a unit that did $14 billion in sales last year. Pfizer's shares rose 5.7% to $26.37.

Elsewhere in the drug sector, British pharmaceuticals giant

GlaxoSmithKline

(GSK) - Get Report

reported earnings of $1.96 billion for the fourth quarter and said that sales rose 13% to 5.9 billion pounds, or about $10.3 billion. Glaxo's U.S.-traded shares rose 1.3% to $50.95.

Cigna

(CI) - Get Report

said fourth-quarter profit fell 60% from a gain-swollen year-ago period to $224 million, or $1.78 a share, while adjusted earnings of $1.98 a share were 34 cents ahead of estimates. Cigna's stock added 1.1% to $121.05.

PepsiCo

(PEP) - Get Report

said it earned 65 cents a share on sales of $10.1 billion in the fourth quarter, matching estimates on the bottom line and beating them on top. The company guided 2006 earnings in line with forecasts. Shares of Pepsi were tacking on 42 cents to $57.28.

As for the market's subgroups, the Philadelphia Stock Exchange Oil Service Sector index was up 0.5%, and the Amex Oil index was down 0.2%.

The Amex Networking index was higher by 3.4%, and the computer hardware sector was up 1%. The airline group was also stronger, rising more than 2% thanks to gains in

Continental

(CAL) - Get Report

,

AMR

(AMR)

and

Mesa Air

(MESA) - Get Report

.

In ratings news,

Sirius

(SIRI) - Get Report

was upgraded to outperform from peer perform at Sanford Bernstein,

Bausch & Lomb

(BOL)

was upgraded to buy by Oppenheimer & Co., and

Under Armour

(UARM)

saw its target cut to $27 from $32 at CSFB.

Overseas markets were lower, with London's FTSE 100 recently down 0.3% to 5728 and Germany's Xetra DAX losing 0.4% to 5652. In Asia, Japan's Nikkei tumbled 2.7% overnight to 16,273, while Hong Kong's Hang Seng lost 0.9% to 15,373.