Disappointing economic news not enough to stop the bulls from pushing stocks higher Wednesday. The Dow ($INDU) added 172.60 points, or 2.05 percent, to close at 8,591.69. The S&P 500 ($SPX) gained 21.93 points, or 2.58 percent, to finish the session at 870.74. The Nasdaq ($COMPQ) tacked on 42.58 points, or 2.94 percent, to 1,492.38. Volume remained moderate on the session with 1.55 billion shares traded on the NYSE and 2.28 billion shares exchanging hands on the Naz. Market breadth was positive by a 20-to-10 and 17-to-11 margin on the Big Board and Naz respectively.

Traders got several economic reports to digest Wednesday with data on the jobs sector most closely watched. The Challenger Job Cut report showed that 181,671 job cuts were announced during the month of November. This was up sharply from the figure of 112,884 in October. The ADP Employment Report was also weak, showing that private nonfarm payrolls fell by 250,000 during the month. This could raise expectations for the nonfarm payrolls release Friday with current estimates for a decline of 300,000.

The Fed Beige Book showed that all 12 Federal Reserve districts saw contraction during the month with spending at stores and for vehicles declining significantly. Maybe traders felt the negative news today should convince the FOMC to cut rates further at their meeting Dec. 15-16. The official announcement that we are in a recession came this week as well, though some were surprised that it started in December 2007.

Mortgage applications rose sharply this past week on a large decline in mortgage rates. This news helped push home builder stocks up on the session with Hovnanian (HOV) up 17.39 percent and Lennar (LEN) tacking on 5.88 percent. Reports in the Wall Street Journal that the Treasury is considering a plan that would lower mortgage rates further also benefited home builders and related industries.

Financials continued their strength Wednesday, trying to make up for large declines on Monday. Shares of Citigroup (C), Bank of America (BAC) and JPMorgan (JPM) rose 8.3 percent, 7.1 percent and 6.0 percent respectively. The Financial Select SPDR (XLF) saw its second straight session of large gains, up 5.17 percent to $12.00. However, the XLF has traded as high as $32.14 in the past year.

Automakers have been in the spotlight of late with the Big Three trying to secure a bailout from the government. They made their plea yesterday on the Hill and they got good news today when the United Auto Workers union said they would make concessions so that a bailout could occur. Shares of General Motors (GM) rose more than one percent on the session with Ford (F) tacking on 5.56 percent.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site