The technology-heavy Nasdaq index closed up 37.48 points, or 1.87% at 2040.64. It was the index's highest close since its record of 2016.44 set on 27 November. Before that record, the Nasdaq's highest close was set in July.

Microsoft increased 6 points to 133.5 after South Carolina withdrew from the antitrust suit against the software maker. The defection from the group of 20 states and the federal government that sued Microsoft marks a victory for the Redmond, Washington-based company.

Dell Computers rose 1.5 to 67.5 and Compaq gained 3.2 to close at 41.

"The outlook for the economy is good for the first half, particularly for technology" as strong sales of personal computers continue, said Stuart Freeman, chief equity strategist at A.G. Edwards & Sons.

FDX, the parent of Federal Express leaped 4.75 to 72 after the company's chief executive said FedEx should grow as online shopping booms.