Stocks climbed and a downtrodden dollar recovered on Wednesday as optimism over a tentative deal to end a strike at General Motors offset data showing a retreat in business spending.
The weak economic numbers actually helped Wall Street as traders speculated that softer manufacturing would prompt another interest rate cut from the Federal Reserve, following a steep half-point reduction to 4.75 percent last week.
These data could reduce the Fed's inflation concerns and that would boost the probability that they would cut interest rates by another 25 basis points, said Richard Huber, an economist at A.G. Edwards & Sons, in St. Louis. The stock market is up and could be pricing in that idea.
A New York Times report that outside investors, including Warren Buffett, might be interested in Bear Stearns, one of the investment banks hardest hit by the crisis in subprime mortgages, also bolstered investor sentiment.
The Dow Jones industrial average advanced 99.50 points, or 0.72 percent, to end at 13,878.15. The Standard & Poor's 500 Index rose 8.21 points, or 0.54 percent, to 1,525.42. The Nasdaq Composite Index gained 15.58 points, or 0.58 percent, to 2,699.03.
Rumblings of compromise from Detroit were a big positive for stocks. The United Auto Workers union and General Motors Corp said they had reached a tentative contract, ending a two-day national strike by 73,000 workers and alleviating some concern that a prolonged standoff would hurt economic growth.
The contract agreement between the UAW and GM set the tone for a bit of a rally, said Eric Kuby, chief investment officer at North Star Investment Management Corp., in Chicago.
News of the deal sent the automaker's shares up 9.4 percent. Bear Stearns was another big gainer, with the buyout rumors driving its stock up 7.7 percent.
The equity gains were broad and global in scope, bolstered by a tentative willingness to embrace risk, following a two-month crisis that has crippled lending in many areas.
Europe's FTSEuropefirst 300 index gained 0.7 percent to finish at 1,539.50, ending two days of losses.
Japan's benchmark Nikkei average edged up 0.2 percent to close at 16,435.74.
A key index of emerging market shares hit a new record high at 1,182.54.
DOLLAR GAINS, BONDS FLAT
Even the beleaguered greenback rebounded from record lows against the euro as its recent plunge attracted buyers. One euro was trading at $1.4126, down 0.13 percent from $1.4145 late on Tuesday in New York. Against Japan's yen, the dollar gained 0.7 percent to trade at 115.50, up from 114.74 yen the previous day.
Bonds stayed flat as stocks gained. The benchmark 10-year U.S. Treasury note was up 1/32 in price at 100-31/32 to yield 4.62 percent.
Oil prices rose to $80.75 a barrel after weekly data showed a surprising increase in U.S. crude inventories. NYMEX November crude settled at $80.30 a barrel, up 77 cents for the session.
Gold for December delivery on the COMEX division of the New York Mercantile Exchange slipped $3.30 to settle at $735.50 per ounce, off recent 28-year peaks as the dollar rebounded and dented its appeal as a hedge against a weak greenback.
Developing-country debt was also benefiting, with spreads on JP Morgan's industry benchmark narrowing 4 basis points. Ecuador, viewed as one of the riskier credits in Latin America, was the greatest beneficiary after the government said a debt restructuring plan would not lead to default.
(Additional reporting by Ellis Mnyandu and Ellen Freilich)