The stock market made up some lost ground yesterday, as the Dow Jones Industrial Average rallied 46 points after Tuesday’s triple-digit decline by the index of 30 bellwether companies. The primary impetus was a successful debt auction by the Portuguese government that eased some concerns about Europe’s financial system. The news from overseas more than offset a subdued Beige Book report from the Federal Reserve. The other major U.S. indexes, the NASDAQ, S&P 500, and the Russell 2000, followed the lead of the Dow 30 with gains of 20, seven, and five points, respectively.

The situation in Europe has been the focus of investors in recent days, especially with U.S. economic data and Wall Street news rather light this week. Yesterday’s news that a government bond auction in Portugal, one of the nations, along with Greece and Spain, that has been at the center of Europe’s credit crisis this year, eased some concerns about the financing problems in Europe. This had a positive effect on the psyche of traders yesterday and also on the value of the euro, which rallied some against the dollar. We also learned this morning that the Bank of England held interest rates steady at a record low of 0.5% for the 18th consecutive month amid growing fears about Europe’s slowing economic growth.

Meanwhile, the economic news on the home front remains far from uplifting, as noted by the release of the Federal Reserve’s Beige Book summation yesterday afternoon. The survey showed that the U.S. economy lost steam in five of the 12 regions tracked by the Fed. The most troublesome spots were the East Coast and Midwest. While the overall economy was still growing, there were several signs of deceleration during the late summer months. Our sense is that the uneven performance of the U.S. economy may make for some choppy trading results as we approach the fall months. The economic news may be a bit more positive today, as investors await the weekly report on initial jobless claims; the consensus is that the metric fell for the third straight week. Still, claims are at levels that indicate that the job market is weak and a sharp upturn in hiring is unlikely anytime soon.

It has been very quite on the corporate front in this holiday shortened workweek. We have had a few noteworthy earnings releases from Bristol Myers-Squibb (BMY) and Silicon Labs (SLAB). Meanwhile, McDonald’s (MCD - Free Analyst Report) announced this morning that its key revenue figure rose 4.6% in the U.S. in August, as customers continued to come in for its frappes and smoothies. The world's largest hamburger chain says overall its August sales at restaurants open more than one year climbed 4.9%.

With less than an hour to go before trading commences, the Dow, S&P 500, and NASDAQ futures are up, presaging a higher opening for the market. Will the bulls make it two days in a row in the driver’s seat? Our sense is that the forthcoming economic news will play a big role in what direction the market ultimately takes today. Stay tuned.