NEW YORK » Wall Street withstood another stream of bad economic readings yesterday, closing sharply higher after investors shuttled between pessimism about the recession and hopes that the nation might start seeing relief soon.

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 was issued.

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 Dow rose 172.60, or 2.05 percent, to 8,591.69. The blue chip index has gained more than 442 points in the past two session, wiping out more than half of Monday's slide.

Broader indexes also closed higher. The Standard & Poor's 500 index rose 21.93, or 2.58 percent, to 870.74, while the Nasdaq composite index rose 42.58, or 2.94 percent, to 1,492.38.

The Russell 2000 index of smaller companies rose 11.94, or 2.70 percent, to 453.76.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 6.01 billion shares, up from 5.79 billion on Tuesday.

The Institute for Supply Management said its services sector index fell to 37.3 in November from 44.4 in October. The reading was significantly lower than the 42 the market expected.

Meanwhile, the U.S. Labor Department reported that productivity rose at an annual rate of 1.3 percent in the July-September quarter. That's down from the 3.6 percent growth rate in the second quarter, but slightly higher than the 1.1 percent initially reported a month ago and better than the 0.9 percent rise economists expected.

Internet research company comScore Inc. said yesterday that online sales spiked 15 percent to $846 million on “;Cyber Monday,”; which was named by the National Retail Federation in 2005 to describe the surge in online spending when customers returned to work after Thanksgiving and shopped from their desks. That helped lift Amazon.com Inc. $4.02, or 9.8 percent, to $45.21.

Bond prices rose yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.67 percent from 2.70 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.02 percent from 0.05 percent late Tuesday.

The dollar was mixed against other major currencies. Gold prices fell.

Light, sweet crude oil rose 17 cents to settle at $46.79 a barrel on the New York Mercantile Exchange.