US technology stocks bounced back smartly yesterday, driving the Nasdaq up more than 4 per cent, as investors shifted back into `new economy' names and out of some banks and basic materials producers after a gut-wrenching week of wild fluctuations.

Analysts said it was a return to the pattern of trading that has characterised the market for much of this year, with the higher-risk, though potentially high-earning Internet-related companies back in favour, while blue-chip stocks from traditional sectors lagged behind.

"I felt all along that as soon as you saw Nasdaq regain its confidence, the money was going to come out of the Dow," said Larry Rice, chief investment officer at Josephthal Lyon & Ross. "But this is the kind of market that carries everything to extremes, so you have to get used to this volatility."

The Nasdaq composite index rose 178.88, or 4.19 per cent, to 4,446.44, led primarily by bellwether names, such as computer maker Hewlett-Packard. The broader Standard & Poor's 500 index finished up 15.01, or 1 per cent, at 1,516.35.