Stocks up despite bad news

After early declines, investors take heart from Federal Reserve meeting notes

NEW YORK -- Wall Street brushed off more bad economic news Tuesday to finish with a moderate advance that left broad stock indexes at their highest levels in two months.

Stocks gained after stumbling in the early going because of mixed data on the service sector, factory orders and pending home sales. While investors expected the readings would show further deterioration, they were hoping the pace of the declines would slow.

Stocks recovered in afternoon trading after the Federal Reserve released minutes from its December meeting, providing insight into the central bank's historic decision to ratchet down its key interest rate to near zero.

Investors hopeful for an economic recovery moved out of sectors like consumer staples and health care that are seen as safe havens during recessions and put money into consumer discretionary names and beaten down financial stocks. Technology shares advanced in part after a Barclays Capital analyst upgraded shares of telecommunications network equipment maker Ciena. Proposals by President-elect Barack Obama to help stimulate economic growth by spending on infrastructure and pushing for tax breaks helped some sectors expected to benefit from a stronger consumer.

"I think people are cautiously optimistic," said Ben Halliburton, chief investment officer at Tradition Capital Management. "They are hopeful that the Obama administration is going to get the economy back on track. But I think the speed at which they get things back on track might be slower than the current consensus believes."

The Dow Jones industrial average rose 62.21, or 0.69 percent, to 9,015.10.

Broader stock indicators showed steeper advances to end at their highest levels since Nov. 5. The Standard & Poor's 500 index rose 0.78 percent to 934.70. The Nasdaq composite index advanced 1.50 percent to 1,652.38.

Since Nov. 20, the Dow is up 19.4 percent, while the S&P 500 is up 25.6 percent. But analysts note that the market is not yet in the clear.

The National Association of Realtors said Tuesday that pending home sales fell to the lowest level on record in November, while the Commerce Department said the drop in factory orders in November was nearly twice as steep as economists had expected. In one bright spot, the Institute for Supply Management said the U.S. services sector contracted at a slower pace last month.

Overseas, Japan's Nikkei stock average rose 0.42 percent, and Hong Kong's Hang Seng index fell 0.35 percent. Britain's FTSE 100 rose 1.29 percent, Germany's DAX index rose 0.85 percent and France's CAC-40 rose 1.08 percent.