Investors set aside concerns about a plunge in housing construction Wednesday and sent stocks sharply higher as they focused on a growing sense that the economic recovery is gathering momentum. The Dow Jones industrials rose nearly 150 points, while the Nasdaq composite index climbed more than 40.
Wall Street was initially concerned that the drop in housing starts indicated that one of the economy's strongest sectors was beginning to falter. But the market recovered from early declines and more than made up for a previous two-day selloff.
Analysts say Wall Street is somewhat immune to bad news right now because investors want to buy stocks during what has traditionally been the strongest time of year for the market.
"We are in the season when stocks do better. The November-December-January period is typically the one when people become more optimistic about the coming year and they become more aggressive in buying stocks," said Bill Barker, investment strategy consultant at RBC Dain Rauscher in Dallas.
The Dow closed up 148.23, or 1.8 percent, at 8,623.01, more than wiping out its previous two-day loss of 104.31.
The broader market also advanced. The Nasdaq rose 44.84, or 3.3 percent, to 1,419.35. The Standard & Poor's 500 index gained 17.41, or 1.9 percent, to 914.15.
"We are in a bit of a grace period right now. Clearly, the psychology of the marketplace is positive. And, people are concerned about getting left behind right now," said Brian Bush, director of equity research at Stephens Inc.
Mutual fund portfolio managers are among Wall Street's big buyers right now, because they don't want to miss out on a fourth-quarter rally, analysts said. So far this quarter, the Dow has gained nearly 14 percent, the Nasdaq has climbed 21 percent and the S&P has risen 12 percent.
"They are putting money to work because they have to. They are beginning to feel the pressure of performance on this quarter," Barker said.
Advancing issues outnumbered decliners 5-to-2 on the New York Stock Exchange. Consolidated volume was moderate at 1.95-billion shares, ahead of Tuesday's 1.69-billion.
The Russell 2000 index, the barometer of smaller company stocks, rose 9.02, or 2.4 percent, to 388.59.