Stocks rose sharply yesterday as Wall Street cheered the Federal Reserve's modest interest rate cut, which was considered positive for the US economy, and news that a court reversed a ruling that would have split up software titan Microsoft.

The Dow Jones industrial average climbed 131.37 points, or 1.26 percent, to end at 10,566.21, while the Nasdaq composite index rallied for a 50.72 point gain, or 2.44 per cent, to 2,125.46. The broad Standard & Poor's 500 index gained 15.13points, or 1.25 per cent, at 1,226.20.

Microsoft rose $1.57, or 2.2 per cent, to $72.71. The shares moved upward, underpinning both the blue-chip Dow Jones Industrial Average and the Nasdaq.

The market also had a delayed rally the last time the Fed fired off a rate cut. The Dow shed 4 points when the Fed lopped 50 basis points off interest rates on May 15th and surged more than 340 points the next day.