Market hope beats pessimism

Associated Press

December 4, 2008

NEW YORK - Wall Street withstood another stream of bad economic readings yesterday, closing sharply higher after investors shuttled between pessimism about the recession and hope that the nation might start seeing relief soon. The major indexes experienced big swings throughout the day, but all closed up more than 2 percent, giving the market its second straight advance.

The day's downbeat news included a drop in productivity, a pullback in the services sector and the Federal Reserve's finding of worsening economic conditions across the country. Investors were initially disheartened by each piece of news but soon shook off their disappointment - until the next dismal report is issued.

Analysts largely believe that much of the bad news is already priced into the market, and they again said stocks remain in a bottoming process after the huge declines of the past two months.

"The market is beginning to look forward, and a lot of the selling pressure appears to be abating," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners.

"Perhaps some of the hedge funds are becoming less aggressive in selling, and investors are starting to look at the future."

The Fed's report, known as the beige book, said the country's economic picture has deteriorated, with Americans hunkered down heading into the holidays. The report suggests the economy was sinking deeper into recession.

Earlier, the Institute for Supply Management, a trade group of purchasing executives, said the nation's services sector contracted dramatically in November as slower spending hurt insurers, retailers and hotels. And the Labor Department reported that productivity growth slowed in the third quarter.

The market has now advanced in seven of the past eight sessions.