Expansion in the service sector and an unexpected gain in factory orders sent the markets soaring to a sharply higher close with the Dow leaping 196 points to 13,445. Nasdaq jumped 47points to 2666.

On the upside

Flow International (Nasdaq: FLOW) agreed to negotiate a deal to purchase competitor Omax.

Blyth (NYSE: BTH) swung to a third quarter profit that easily surpassed expectations as expenses fell prompting the home expressions company to lift its fiscal 2008 guidance.

Mexican home builder Homex (NYSE: HXM) forecast revenue growth of between 16% to 18% next year, which was greater than the growth forecast of rivals.

On the downside

Moody's Investors Service warned that MBIA (NYSE: MBI) is at risk of experiencing a capital shortfall due to mortgage related losses.

An FDA panel of advisors voted against expanding the use of Genetech's (NYSE: DNA) Avastin in breast cancer patients.

Shares of AMR (NYSE: AMR) tumbled as oil prices rose and competitors reported weak fourth quarter revenue.

In the broad market, advancing issues outpaced decliners by a margin of nearly 3 to 1 on the NYSE and by 2 to 1 on Nasdaq. The Russell 2000 which tracks small cap stocks surged 14 points to 766.