US stocks rallied for a second straight day after reports on robust online holiday spending and a surprise jump in mortgage applications offset a batch of dismal economic data.

The Dow Jones Industrial Average powered 172.60 points higher to close at 8,591.69 and the tech-heavy Nasdaq composite climbed 42.58 points to 1,492.38.

Investors cheered a report by digital research firm comScore showing a double-digit rise in online holiday spending over last weekend and sales up 15 per cent on“Cyber Monday” sales to $846 million dollars, the second-highest day on record.

Online retailer Amazon jumped 9.76 per cent to €45.21 dollars.

“The news helped offset data showing further weakness in the labour market,” said Goldman.

Shares ohad opened the day sharply lower as new figures revealed record contraction in the services sector and the loss of 250,000 private sector jobs last month. The Dow Jones industrial average opened down 155.95 points at 8,263.14 after investors were also spooked by yesterday’s $31 billion (£21 billion) rescue deal sought by America's biggest carmakers.

The US service sector hit the lowest level on record in November, according to figures from the Institute for Supply Management (ISM), a trade group of purchasing executives.

The ISM said its index fell from 44.4 in October to 37.3 in November, the lowest since records began in 1997. The reading measures non-manufacturing businesses. A figure below 50 indicates contraction in the sector.

Earlier today, figures showed record contraction in the services sector in the UK, lending weight to calls for a steep interest rate cut by the Bank of England tomorrow.

The Dow's fall also followed new figures that showed that 250,000 private sector jobs were cut in the US last month, the biggest number of losses since November 2001 and the downturn that followed the terrorist attacks of September 11.

Figures released today by ADP Employer Services, the business outsourcing and administration provider, show job losses have declined further from October's figure of 179,000.

The construction industry suffered its 24th consecutive month of job cuts, with a further 44,000 positions shed last month.

In goods-producing industries, 158,000 jobs were cut, and service providers cut 92,000 jobs.

Medium-sized companies, with between 50 and 499 employees, let 130,000 workers go, and small firms cut a total of 79,000 staff.

Companies with more than 499 employees cut 41,000 jobs. ADP, which takes only private employment into account, has consistently underestimated job losses this year.

The US Labour Department has reported that private employers have dropped an average 134,000 workers a month between January and October this year. ADP's estimate was 17,600.

In total, 1.2 million American jobs were lost in the first ten months of 2008.

Today's ADP figures come ahead of official Government statistics due on Friday, which are expected to show that more than 300,000 jobs were cut in November and that US unemployment has hit a new high.

The Dow was further depressed by an announcement from Research in Motion, makers of the BlackBerry, which cut its outlook for the third quarter after securing fewer new subscribers than expected.

Shares on Wall Street rallied yesterday, recovering from steep losses on Monday, but later in the day the difficulties facing the American car industry were reinforced when the chief executives of the country's leading manufacturers appealed to Congress for a larger-than-expected government bailout.

The heads of the Big Three car companies — Alan Mulally of Ford, Rick Wagoner of General Motors and Robert Nardelli of Chrysler — offered to cut their annual pay to $1 and sell their company jets in return for a $31 billion emergency bridging loan from Washington.

On Monday, Ben Bernanke, chairman of the Federal Reserve, indicated that US interest rates could be cut to an unprecedented low of below 1 per cent later this month, after it emerged that the American economy had been in recession since December 2007.

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