Stocks soared Thursday as Wall Street loudly cheered Wednesday's Federal Reserve interest rate cut and a federal appeals court's partial reversal of the breakup of Microsoft.

The market leapt around midday after a U.S. appeals court threw out a lower court's finding that Microsoft had tried to monopolize the Internet browser market. Microsoft, often seen as bellwether for the technology sector, rose and boosted other tech shares.

The technology-heavy Nasdaq Composite Index rose 50.90 points, or 2.45 percent, to 2,125.64, after jumping nearly 4 percent. The blue-chip Dow Jones industrial average leaped 131.37 points, or 1.26 percent, to 10,566.21, with Microsoft making up 7.8 percent of the Dow's rise, while the broader Standard & Poor's 500 Index rose 15.16 points, or 1.25 percent, at 1,226.23. 

Investors, who shrugged off the Fed rate cut a day earlier, are now betting the slower pace of monetary easing could signal the worst is over for the U.S. economy, analysts said. 

``People may just be sitting back and realizing that interest rates have come down a lot, and the tax bill will start to take effect over the next six to 12 months, so it could be the darkest part of the night before the dawn,'' said Nat Paull, senior portfolio manager at New Amsterdam Partners, which oversees about $1.2 billion.

Microsoft rose $1.57 to $72.71, bolstering both the Dow and the Nasdaq. The company's stock has surged 67.6 percent so far this year, outperforming the three major stock indexes. The Dow industrials have lost roughly 2 percent, the S&P 500 is off 7 percent and the Nasdaq down 14 percent this year. 

The ruling ``eliminates the possibility of interference on behalf of the government, and lessens the likelihood the government steps in relation to technology companies and anti-competitive behavior,'' said Owen Fitzpatrick, co-head of U.S. large-cap equities at Bankers Trust Private Banking, which oversees $9 billion in equities. 

The ruling may not be good news for Microsoft's rivals, however, like AOL Time Warner Inc. AOL fell 60 cents to $52.08. 

Meanwhile, investors were snapping up other technology shares, hopeful that things cannot get much worse for the beaten-down sector. 

Specialty chip maker Altera Corp. rose $1.86 to $28 after announcing big job cutbacks and restating its forecast of dismal sales. The company said it ``continues to see signs of stability in North America'' although ``international business has remained soft.'' 

The Philadelphia Stock Exchange semiconductor index rose 3.66 percent. 

Oracle Corp. climbed after the software maker said the business climate is better now than in the March-May quarter. Its stock rose $1.14 to $19.18. 

In what may be a sign investors are getting less skittish about Wall Street, investors poured new money into stock mutual funds in May for the second month in a row, although the pace was moderately below April levels. U.S. stock funds took in a net $17.29 billion last month, down from a revised $19.21 billion in April, the Investment Company Institute (ICI) said. June's inflows have taken a hit as the summer doldrums hit the stock market, big fund companies like Vanguard told Reuters. 

General Electric Co. ticked up 46 cents to $48.72, while Honeywell International Inc. jumped $2.59 to $39.59. Both boosted the Dow on renewed hopes their mega-merger could be salvaged. Sources said GE may divest part its aircraft leasing arm in a bid to win European Union approval for its proposed $41.2 billion takeover of Honeywell. 

Poultry giant Tyson Foods Inc. edged up 22 cents to $9.07, while beef and pork producer IBP Inc. gained 75 cents to $25.05. Tyson agreed to buy IBP and form the largest U.S. meat company in a deal valued at around $2.7 billion, less than its previous bid. Recently, a judge forced Tyson to renegotiate the deal it had abandoned in March. 

Redback Networks Inc. lost $2.31, or more than 20 percent, to $9. The Internet infrastructure firm warned its revenues would be more than 30 percent lower than anticipated because of an ``unprecedented downturn'' in the market for telecommunications gear.

Advancing issues outnumbered decliners more than 3 to 2 on the New York Stock Exchange. Volume came to 1.30 billion shares, ahead of the 1.14 billion shares reported on Wednesday.

The Russell 2000 index, which tracks the performance of smaller company stocks, rose 7.41 to 502.99. 

Overseas, Japan's Nikkei stock average fell 1.2 percent. European stocks fared better. Germany's DAX index gained 2.4 percent, Britain's FT-SE 100 advanced 0.5 percent, and France's CAC-40 climbed 1.5 percent.

-- The Associated Press and Reuters contributed to this report.