Stocks rallied strongly Wednesday, pushing the Dow industrials past 11,200, as investors bought stocks on hopes that the Federal Reserve's latest interest-rate cut will be the catalyst that pulls the U.S. economy out of its slump.

The Dow Jones industrial average surged 343.15 to close at 11,216.12. The last time the blue chip index finished above 11,000 was Sept. 14 when it ended at 11,087.47. The last time the Dow ended higher was Sept. 12 when it closed at 11,233.23.

The Nasdaq composite index gained 80 points at 2166, and the broader Standard & Poor's 500 Index gained 35.53 points.

``This thing really has legs. It's significant and you best not fight it,'' said Gary Kaltbaum, market technician at Investors' Edge Partners.

Investors bought stocks based on the market's tendency to move higher about six months after the Federal Reserve starts to lower interest rates, Kaltbaum said. The central bank made its first cut on Jan. 3.

Analysts attributed the sharp upturn largely to professional money managers pumping the cash they've been holding onto back into the market. Meanwhile, investors overlooked poor earnings and other signs of economic weakness, including a 0.3 percent rise in consumer inflation reported for April.

``Institutions are now accumulating stocks, and they don't care about the bad news. They only care about the potential of good news down the road,'' Kaltbaum said.

``The economy will recover, we're not in terrible shape,'' said Charles Pradilla, chief investment strategist for SG Cowen Securities. ``This thing is going to turn and every portfolio manager out there has got to play.''

Gains were widespread with investors bidding up safer and riskier sectors alike.

Drug maker Merck climbed $2.20 to $78.10, while Microsoft rose 89 cents to $69.16. Alcoa claimed a new 52-week high, up $2.51 at $44.51, and Hewlett-Packard rose $1.34 to $26.74.

Among the Dow's 30 stocks, there was just one loser, Wal-Mart, off 35 cents at $51.65. The mega retailer said Tuesday that it doesn't expect double-digit growth to return until the second half of 2001.

Other stocks managed to move higher despite the latest evidence that their business has suffered as the economy has slowed down.

Applied Materials rose sharply, up $4.20 at $54.09, after the world's largest manufacturer of chip-making equipment on Tuesday missed second-quarter earnings expectations by a penny a share and announced cost-cutting efforts, which include offering severance packages to up to 1,000 employees.

Even as companies announce layoffs and trim operations, Pradilla said the economy does have some brighter spots.

``We are not falling off a cliff here,'' he said. ``Housing is still very strong. We are seeing some strong auto sales. ... This is not an economy that is in a rout, and we are going to see some positive things from what the Fed is doing.''

In a heavily-traded session, advancing issues outnumbered decliners 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, the barometer of smaller companies, advanced 7.58 to 497.21.

Overseas markets were mixed Wednesday. Japan's Nikkei stock average fell 2.6 percent, and France's CAC-40 slipped 0.4 percent. But Germany's DAX index advanced 1.3 percent, and Britain's FT-SE 100 rose 0.7 percent.

Reuters and the Associated Press comtributed to this report.