Stocks surged on Tuesday as an unexpected leap in housing starts pushed Home Depot and other retailers higher while bullish comments from a broker on Cisco Systems helped technology shares rebound.

A nearly 4 percent rise in U.S. crude oil futures boosted energy shares. Chevron shares rose 3.8 percent to $65.31 and ranked as the Dow's top gainer.

Retailer Home Depot's stock was another top Dow advancer, rising 6.7 percent to $21.48, after data showed housing starts rose 22.2 percent in February and a brokerage raised its view on several retailers, citing an improved outlook for the economy.

The Nasdaq reversed a 1.9 percent slide on Monday after Goldman said investors should buy Cisco Systems on the view a new server will increase the company's profits. The stock rose 4.5 percent to $16.14.

Investors are starting to get a sense that things are stabilizing. They're not getting any worse, said Terry Morris, a portfolio manager with National Penn Investors Trust Company in Reading, Pennsylvania.

The Dow Jones industrial average <.DJI> gained 178.73 points, or 2.48 percent, to 7,395.70. The Standard & Poor's 500 Index <.SPX> rose 24.23 points, or 3.21 percent, to 778.12. The Nasdaq Composite Index <.IXIC> jumped 58.09 points, or 4.14 percent, to 1,462.11.

The S&P 500 is now up 14 percent from its bear-market closing low on March 9.

The Dow Jones home construction index <.DJUSHB> rose 6.3 percent after data showed housing starts jumped 22.2 percent in February, the biggest percentage rise since January 1990, and also the first increase since last April.

Among home builders' stocks, top boosts included Pulte Homes
, up 6.7 percent at $10.16, and Toll Brothers , up 5.9 percent at $17.06.

Optimism about the banking sector has helped the market rebound from 12-year lows hit earlier this month. JPMorgan Chase & Co shares rose 8.9 percent to $25.14. An S&P financial sector index <.GSPF> climbed 6.6 percent.

Even though the Obama administration has yet to detail how toxic assets will be taken off balance sheets, optimism about banks has risen in recent days as executives talked of a strong start to 2009.

The S&P Retail index <.RLX> rose 5.4 percent.

Alcoa was the top drag on the Dow, falling 8.7 percent to $5.59 after it said it will slash its dividend, issue stock and convertible notes worth $1.1 billion, and trim its 2010 spending.

Trading was moderate on the New York Stock Exchange, with about 1.49 billion shares changing hands, matching last year's estimated daily average, while on Nasdaq, about 2.11 billion shares traded, below last year's daily average of 2.28 billion..

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 4 to 1, while on the Nasdaq, about seven stocks rose for every two that fell.

(Editing by Jan Paschal)