Wall St rallies on economic hopes

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks rose on Wednesday after housing and factory data, along with a Federal Reserve report, lifted hopes the U.S. recession is easing even as other news showed the global economy is still contracting, which boosted the allure of the safe-haven dollar.

Oil fell marginally as declining consumer demand pushed the level of U.S. crude stocks last week to their highest since September 1990. But inflation fears and bullish sentiment in U.S. stock markets kept prices from falling further.

While investors took heart from the glimmer of hope offered by different reports, government data and corporate news from around the world also provided a sobering economic outlook.

U.S. Treasury debt prices mostly gained on data showing U.S. industrial output shrank more than expected in March amid nary a whiff of inflation.

Germany's wholesale prices suffered their biggest fall in 22 years and on Thursday, China is poised to report its slowest quarterly growth in nearly two decades. That could dampen hopes it can lift the rest of the world out of recession.

All three major U.S. stock indexes turned positive in late trading in a choppy session.

The Fed said the U.S. economy continued to weaken in March and early April, but the speed of contraction was fading amid scattered signs the country's recession may be nearing an end.

"The Beige Book is feeding into the whole general picture of the market," said Carl Birkelbach, chairman and chief executive of Birkelbach Investment Securities in Chicago, referring to the Federal Reserve's monthly compilation of anecdotal information from the U.S. central bank's business contacts.