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 sell-off.

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, according to preliminary calculations. The gain allowed the Dow to more than wipe 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.

The Commerce Department reported that new housing construction fell by 11.4 percent in October, the biggest drop since 1994 and weaker than analysts expected.

The report followed a profit warning yesterday from Home Depot. The two developments raised questions about housing and consumer spending, which have been the two brighter spots in the economy during the bear market.

But the concerns weren't enough to derail Wall Street's upward momentum, which analysts attributed to better-than-expected third-quarter earnings and the growing belief that earnings and the economy will be stronger in 2003.

Mutual fund portfolio managers are among Wall Street's big buyers right, 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.

The market was strong across sectors.

Dow industrial International Paper rose 54 cents to $35.76 on an upgrade from CIBC World Markets.

Maytag jumped $2.56 to $27.37 after backing its 2002 earnings outlook and setting revenue growth goals of 7 percent to 10 percent for next year.

The retailing sector was a bright spot. Saks rose $1.39 to $12.30 on better-than-expected third-quarter profits of 3 cents a share, ahead of forecasts of a 3-cent loss.

Williams-Sonoma advanced $1.20 to $24.90, having reported yesterday that third-quarter profits nearly quadrupled because of strong sales.

Advancing issues outnumbered decliners 9 to 5 on the New York Stock Exchange. Trading volume was moderate.

The Russell 2000 index, the barometer of smaller company stocks, rose 8.99, or 2.4 percent, to 388.56.