Wall Street Rallies Despite Weak Economic Data

December 3, 2008 5:12 p.m. EST

New York, NY (AHN) - U.S. markets opened Wednesday lower but were able to shake off poor ADP employment data and a weak Fed beige book report to finish with gains. A late rally sent all three major indices 2 percent higher.

ADP employment data showed a drop of 250,000 in nonfarm private sector employment for November. The drop was larger than the 205,000 markets has anticipated and leaves a worried outlook for Friday's employment data from the Labor Department.

The Federal Reserve painted a bleak picture for the economy with its latest beige book. The report is a snapshot of 12 districts across the U.S., all of them reported weakening business conditions.

Consumer spending and retail sales were the main culprits with weak real estate markets also in the mix. On the flipside, weak sales and falling commodity prices have led to price and wage pressures essentially running flat.

The Dow Jones Industrial average rose 172 points or 2 percent. 27 of 30 Dow components rose on Wednesday with Citigroup, Bank of America and JP Morgan leading the way, all up more than 6 percent.

The S&P 500 added 22 points or 2.6 percent. The financials helped push the index higher as the sector added 5.6 percent on Wednesday.

Tech performed best as the Nasdaq Composite added 42 points or 2.9 percent. The semiconductor stocks were very strong as the sector added 6.5 percent on the session.

The homebuilders rose 11 percent on news mortgage applications surged 112 percent last week due to a steep drop in the 30 year fixed mortgage rate to 5.65 percent. The drop is largely due to the government's plan to use $500 billion to purchase mortgage assets.

Retailers saw a 6.3 percent pop after e-commerce tracker comScore said online spending rose 13 percent for the four day period from Black Friday to Monday.

The price of crude oil finished slightly lower, down 4 cents a barrel to $46.92. Weekly oil inventories showed an unexpected decline in reserves for both oil and gasoline, but the news did little to rally the commodity.

In other economic news, the November ISM index, which tracks nonmanufacturing activity, fell to 37.3. That marks the lowest level since 1997 when the index was created.

Thursday's session will see the release of initial unemployment claims for the week ending Nov. 29 along with October factory orders.