Updated from 4:05 p.m. EST

Stocks roared back to life Thursday, snapping a five-day losing streak for blue-chips, as a rally in semiconductors powered the Nasdaq to its best day in 18 months and propelled the broader market.

By the close, the Nasdaq had risen 57.69 points, or 3%, to 1967.1, its best single-day performance since Oct. 15, 2002. Chip investors bid up the Philadelphia Semiconductor Index 3.7% following strong demand forecasts from Micron ( MU) and Applied Materials ( AMAT). A bullish estimate from Lattice Semiconductor ( LSCC) also lent support.

Meanwhile, the Dow Jones Industrial Average jumped 170.59 points, or 1.7%, to 10,218.82, posting its best point gain this year, while the S&P 500 added 17.95 points, or 1.6%, to 1109.28.

Volume on the New York Stock Exchange approached 1.5 billion shares, while over 1.9 billion shares changed hands on the Nasdaq. Advancers outpaced decliners by 7 to 2 on both exchanges.

"People were a little itchy to get out of their shorts, which probably started things off, and they had some cash to put to work after all this selling," said Sean Martin, head trader at A. Gary Shilling. "Before I would get excited about getting on the long side, I'd like to see some back-and-forth here, holding these recent lows we made."

"We've really needed this correction to shake things out, and we've got it," Martin added. "Now, that doesn't mean we won't go lower, but I think most of it's out of the way."

Micron executives said on a conference call that demand for chips had strengthened in recent weeks and was strong across most of the company's product lines, from commercial applications to notebooks. Such forecasts are often viewed as proxies for the broader economy, given semiconductors' ubiquity in consumer electronics.

Micron's outlook wasn't good enough to lift its own shares, which gave back 1.8% because of a second-quarter revenue miss.

The group got a major boost when Applied Materials CFO Joseph Bronson told analysts that a recent rebound in semiconductor-equipment sales has legs. The sector's revival "is in the early stages, not the later stages," Bronson said, according to Reuters. The stock was up 48 cents, or 2.3%, to $21.25.

Lattice gained 3% after the chipmaker raised its first quarter guidance, saying it would earn between $58.1 million and $59.7 million. Consensus estimates were forecasting earnings at $56.12 million. The shares added 26 cents to $8.98.

The good cheer coaxed out buyers after a tough few sessions. Among the big movers in semiconductor-related companies were Intel ( INTC), up 4.7%; Vitesse ( VTSS), up over 5%; National Semicondutor ( NSM), up 7.3%; and Cisco ( CSCO), up over 4%.

Robert Pavlik, a portfolio manager at Oaktree Asset Management, said he stayed on the sidelines for the most part today because he still sees some room for downside. "This rebound came after nothing really changed out there, fundamentally," said Pavlick. "It's too early to say that we hit bottom yet, especially heading into next week with Friday's report on employment in March. I think the market just needed a day like this after so many down days in a row."

"There's really been no upside, like one or two solid days in a row," said John Hughes, equity strategist at Shields & Co. "The problem is that when everyone's looking for a low, you typically don't make one that way."

Reports of positive comments from Fed officials also lifted spirits. Fed Governor Donald Kohn signaled that the central bank is in no hurry to raise interest rates in a speech to professional economists. He said that patience is still the best course for monetary policy decisions. Also, Federal President of St. Louis William Poole told journalists in Memphis, Tenn. that he expects substantial job gains this year, but can't say when hiring will accelerate. Later, he told students at a local college that international trade is a good thing for the U.S. economy and that the outsourcing of jobs will add up to a benefit for American workers in the future.

"What the Feds are saying is that rates are at artificially low levels right now, but they're going to keep them there for a while longer," said Larry Wachtel, a senior market analyst at Wachovia Securities. "They're going to accommodate businesses until they see hiring start to come back to where it should be."

The 10-year Treasury note traded down 7/32 to yield 3.73%. The dollar was lower against the yen and the euro, while gold futures fell and crude oil ended with a slight gain.

Thursday's economic reports were mostly in line, with fourth-quarter GPD growth pegged at 4.1% in the final revision, jobless claims up moderately and February existing-home sales in line with estimates at 6.12 million annualized.

In Europe, London's FTSE 100 closed up 1.5% to 4374, while Germany's Xetra DAX was rising 2.3% to 3812. In Asia, Japan's Nikkei rose 1.5% to 11,531, while Hong Kong's Hang Seng fell 1.3% to 12,520.

In corporate news, Sharper Image ( SHRP) reported a 35% rise in its fourth-quarter profit. The home electronics seller met Wall Street's expectations, earning $22.8 million, or $1.40 a share, for the quarter, up from $16.9 million, or $1.26 a share, in the same quarter last year. Shares closed down $1.03, or 3%, to $33.20.

A.G. Edwards ( AGE) reported that fourth-quarter profit more than doubled, earning $54 million, or 67 cents per share, compared with $21 million, or 26 per share, a year earlier. It shares closed up $1.99, or 5.7%, to $36.66.

Earlier, Avon Products ( AVP) raised first-quarter earnings guidance, saying it expects a profit of 59 cents a share, or about 8 cents more than analysts were forecasting. The company cited strength in Latin America and Europe. Its shares closed up $4.78, or 6.8%, to $75.35.

Agricultural products giant ConAgra ( CAG) said third-quarter earnings rose to 38 cents a share from 30 cents a share last year on roughly flat revenue. The results were in line with expectations. It shares closed up 89 cents, or 3.5% to $26.64.

On Friday, economic reports on personal income and consumption in February are due out from the government at 8:30 a.m. EST. Consensus estimates are forecasting that personal incomes jumped 0.3% for the month, up from 0.2% in January, and personal consumption increased 0.5%, up from 0.4%.

At 9:45 a.m. EST, the University of Michigan is expected to report that revised figures for its consumer sentiment index in March came in down a fraction at 94 from the previously reported 94.1. Then at 10:30 a.m. EST, the Conference Board will report results from its weekly leading index.

EchoStar ( DISH) will release fourth-quarter results before the opening bell. Analysts expect it to report earnings of 9 cents a share, according to consensus estimates reported by Thomson One Analytics, up from a loss of $1.13 a share in the same quarter last year.