NEW YORK (CNN/Money) - Stocks shrugged off some dismal economic news and continued war talk Tuesday to end the day in the black after four sessions of declines, but investors will find out Wednesday whether the day's gains were just an April Fool's Day prank.

The Dow Jones industrial average (up 77.73 to 8069.86, Charts) rose 1 percent, while the S&P 500 (up 10.30 to 858.48, Charts) gained 1.2 percent, and the Nasdaq composite (up 7.13 to 1348.30, Charts) registered a 0.5 percent rise.

Wall Street's concern over the war in Iraq continued to weigh on the market, but the U.S. economy also factored into trading decisions Tuesday. The latest news on weakness in manufacturing activity only came to reinforce thinking in the market that the economy could very well be on the brink of, if not already in, another recession.

Still, traders, finding the market oversold after four sessions of declines, jumped in to snap up some bargain stocks.

Investors likely will continue to take cues from war news Wednesday. Tuesday night, CNN reported U.S. forces began a major ground offensive against at least two Republican Guard divisions south of Baghdad, in what could be the opening stages of a push toward the Iraqi capital.

Officials also said a U.S. prisoner of war had been rescued by coalition forces.

Only one significant economic report is on the docket Wednesday. The government is set to release its reading on factory orders in February, which economists surveyed by Briefing.com expect slipped 0.7 percent after rising 1.5 percent in January.

Also Wednesday, investors will get a dose of earnings from retailers, including Bed Bath & Beyond (BBBY: Research, Estimates), which is expected to show improved results from the same period last year, and Circuit City (CC: Research, Estimates), for which analysts forecast a significantly decline for the quarter.

The Institute for Supply Management released its March index measuring manufacturing activity in the country Tuesday -- which contracted for the first time since October 2002. The reading came in at 46.2, compared with the previous month's 50.5 and economists' expectations for a reading of 48.6.

Anything below 50 indicates the manufacturing sector is contracting. A reading below 42.7 over a period of time also implies the entire economy, as expressed by gross domestic product, is declining.

But, after the decline in the index initially spooked investors, further analysis showed some areas of strength. Traders said what they perceived as a better-than-expected gain in new orders and a rise in prices paid, from 65.5 to 70, provided some hope for the economy.

"It shows corporations are ready to raise prices," said Peter Green, market analyst at MKM Partners. "I see a short-term upside for the market that will last, maybe, into tomorrow. "

The market has struggled with its two major hurdles -- the war and the sluggish economy -- for months now. Although a couple of strong rallies, most recently the eight-day winning streak that came around the start of the war two weeks ago, have provided some cushioning for stocks, the three major indexes had a less-than-spectacular first quarter. The Dow declined 4.2 percent in the first three months of the year, and the S&P 500 registered losses of 3.6 percent. The Nasdaq was the only major index to register a gain in the quarter, advancing a mere 0.4 percent.

And Tuesday brought in a wave of buying, mostly due to the market's oversold condition, snapping a four-session losing streak.

"It's a broad advance today -- pretty much every sector is up," said Tom Schrader, head of listed trading at Legg Mason. "It's really just a case of ... an oversold market, but sometimes oversold markets pick up steam."

Among the issues standing out, shares of American Airlines parent AMR Corp. (AMR: up $0.90 to $3.00, Research, Estimates) rose more than 42 percent after the company narrowly avoided a bankruptcy filing by reaching tentative deals with its unions late Monday.

The three major U.S. automakers reported lower domestic March sales as they hiked incentives in a move to spur lagging sales. Ford (F: down $0.04 to $7.48, Research, Estimates) shares slipped after the No. 2 automaker said its sales fell 7.9 percent in March, a greater dip than the 4.8 percent expected by analysts. General Motors (GM: up $0.18 to $33.80, Research, Estimates) and DaimlerChrysler (DCX: down $0.04 to $29.27, Research, Estimates) each said sales were off 3 percent.

Market breadth was positive. Gaining stocks beat out losers on the New York Stock Exchange by a margin of more than 2 to 1, on volume of 1.4 billion shares. On the Nasdaq, advancers edged past decliners 3 to 2 as 1.4 billion shares changed hands.

U.S. Treasury bonds logged declines, with the benchmark 10-year note losing 4/32 of a point in price, its yield edging up to 3.81 percent. The dollar was virtually unchanged against the yen and the euro.

Oil futures retreated, with light sweet crude for May delivery falling $1.26 cents to $29.78 a barrel in New York. World oil prices declined after the cancellation of a general strike in Nigeria raised hopes that output closed by ethnic clashes in the West African OPEC member might soon return to normal.

Gold for June delivery shed $1.70 and ounce to trade at $335.20.

European stock markets ended the day higher. Stocks in Asia closed mixed overnight, with many still spooked by a mysterious pneumonia-type disease, called SARS, spreading most rapidly throughout Asia. Passengers on an American Airlines flight from Tokyo to San Jose, Calif., were quarantined after four passengers complained of SARS symptoms.