Wall Street jumps on Coke and other defensive plays

NEW YORK (Reuters) - Stocks rose for a second day on Wednesday as investors flocked to shares of Coke and other companies that hold up well in recessions following another round of disappointing economic data and corporate outlooks.

Coca-Cola Co , the soft-drink maker, rose 5 percent, making it one of the Dow's top advancers. Fast-food chain McDonald's was another standout, rising more than 4 percent.

Large biotechnology stocks, also seen as a defensive hedge against the weakening economy, were another hot spot. The American Stock Exchange's Biotechnology Index <.BTK> rose almost 3 percent

"Investors are trying to find stable (areas) -- consumer staples, health care and biotech," said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas. "They're asking, 'What might be the safest parts of the market?'

"One can make the case that you can make a lot of money with blue chips in the next 10 years."

The Dow Jones industrial average <.DJI> jumped 172.60 points, or 2.05 percent, to end at 8,591.69. The Standard & Poor's 500 Index <.SPX> rose 21.93 points, or 2.58 percent, to 870.74. The Nasdaq Composite Index <.IXIC> shot up 42.58 points, or 2.94 percent, to 1,492.38.

Combined with Tuesday's gain, the S&P has clawed back about 70 percent of the ground lost in Monday's big sell-off. The benchmark index has risen in seven of the last eight sessions, gaining 15.7 percent from an 11-year low set in late November.

BALM FROM GILEAD

Shares of Gilead Sciences , up 4.7 percent at $46.17, and Amgen , up 5.2 percent at $57.47, were among the Nasdaq's leaders on the belief that the administration of President-elect Barack Obama might be more favorable to their prospects.

The rise in defensive stocks helped offset concerns sparked by gloomy corporate outlooks from companies, including mining company Freeport-McMoRan Copper & Gold Inc , which suspended its dividend, cut its 2009 capital expenditure budget and reduced its copper output.

Before the opening bell, ADP Employer Services said U.S. private-sector employers cut a larger-than-expected 250,000 jobs in November, the most in seven years, two days before the release of the government's unemployment figures.

The ADP data offered more evidence of the extent of the recession, which began a year ago and has been marked by the housing downturn and rising unemployment. A bleak jobs picture creates a major headwind as the market attempts to recover from lows going back nearly 11 years.

ADP also bumped up the number of jobs cut in October.

Sentiment was also jolted by a report that showed the vast services sector contracted further in November, sending the non-manufacturing sector gauge of the Institute for Supply Management down to a record low.

The market slipped into negative territory in the latter portion of the session around the release of the Federal Reserve's Beige Book, an anecdotal report across 12 regions, which showed economic activity had weakened across the United States since early October.

CATCH A FALLING MORTGAGE RATE

Comments from Legg Mason's Bill Miller that U.S. equities had reached a bottom aided in improving investor sentiment.

Shortly before the closing bell, the Wall Street Journal reported that the U.S. Treasury Department is considering a plan to stem the fall of home prices by lowering mortgage rates through Fannie Mae and Freddie Mac , which helped fuel the late rally.

Fannie Mae rose 2.4 percent while Freddie Mac gained 6.5 percent.

Besides a boost from biotech shares, the Nasdaq also got a lift from shares of big-cap technology companies after Cisco Systems Inc said it did not plan layoffs at this point.

That reassuring view sent Cisco shares up 4.5 percent to $16.01. Shares of Research in Motion reversed an earlier slide triggered by its profit warning and ended the session up 4.4 percent at $38.96; earlier, the shares fell as low as $35.09.

But slackening demand sent Freeport down over 17 percent lower to $$18.05. Aluminum producer Alcoa fell almost 5 percent to $9.29.

Advancers outnumbered decliners by 2 to 1 on the New York Stock Exchange, while the ratio was about 1.6 to 1 on the Nasdaq.

Volume totaled 1.55 billion shares on the New York Stock Exchange, below last year's daily average of 1.90 billion. About 2.30 billion shares traded on the Nasdaq, above last year's daily average of 2.17 billion.

(Editing by Jan Paschal)

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