Positive manufacturing reports from China and the United States helped to propel domestic markets to their best gains since early July. The S&P 500 and NASDAQ both gained 3%.  A slew of economic data was released Wednesday but with an oversold market, traders chose to focus on the positive line items and ignore the negative.

On the positive side was a surprising ISM figure for manufacturing which is in sharp contrast to the regional Fed data seen over the past few weeks.   On the negative side was a contraction in private payrolls per ADP and a dip in construction spending to the lowest level in a decade.  But the excitement over the Chinese data along with the reversal of fortunes in U.S. ISM were all the market focused on.

• The August ISM Manufacturing Index came in at 56.3. Its increase from 55.5 from July flew in the face of calls for a decline to 52.9.
• August ADP Employment  report indicated that private payrolls fell by 10,000 last month, when an increase of 13,000 had been widely expected.
• Construction activity dropped 1% in July, the third straight monthly decline, the Commerce Department said Wednesday. Government revisions showed much weaker activity than previously reported for May and June.  The July construction decline pushed building activity down to a seasonally adjusted annual rate of $805.2 billion. That's 10.7 percent below the pace of a year ago and the lowest level since July 2000.

The dollar dropped 0.9% while gold slipped $2.20 to settle at $1,248.10 an ounce, while silver fell 0.2% to $19.39.  Oil spiked 2.8% to $73.91. The yield on the 10-year Treasury note rose to 2.58% from 2.47% Tuesday.

European markets had their own manufacturing reports released, but essentially traded off the same Chinese & American data.  Britain and Germany gained 2.7%, while France jumped 3.8%.

• Orders for German machinery were up 48% on the year in July, led by strong foreign demand.

Ironically, China itself did not rally on its manufacturing data even as it helped drive a worldwide rally.  Its market was down 0.6%, while Japan gained 1.2% and India 1.4%.  Australia also showed some impressive GDP growth overnight.

• Chinese manufacturing growth improved and auto sales rebounded in August, suggesting the world's second-biggest economy may not be slowing as quickly as feared.  China's Shanghai index dropped however, as many mainland investors doubted the uptick means the slowdown in China's rapid growth has been halted.
• The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose to 51.7 in August from 51.2 July and 52.1 in June. Numbers above 50 show manufacturing activity expanding.  The federation's PMI readings have remained above 50 for 18 straight months after slowing in late 2008 and early 2009.
• Another survey, the HSBC China Manufacturing PMI -- a seasonally adjusted index designed to measure the performance of the manufacturing economy -- rose in August to its highest level in three month, at 51.9.
•  Australia's economy grew at its fastest pace in three years in the second quarter as demand from China and elsewhere in Asia boosted exports of iron ore and other commodities.  The statistics bureau said second quarter growth was driven by a 5.6% increase in exports and a 1.6% increase in household expenditures.

The Brazilian market gained 3%.