Wall Street Starts New Year With a Surge

 

Wall Street indexes started the new year with sharp gains on Monday, extending the late-2010 rally on optimistic signs about a global recovery.

The Nasdaq hit a 10-year high in intraday trading, driven largely by gains in Apple, which hit an all-time high of $330.20 and is up 56 percent since the end of 2009. The Nasdaq, however, is still half of the all-time high of 2000.

Shares got a lift from the “January effect” when fund managers are no longer engaged in year-end window dressing and focus on shares that they find attractive.

Bolstering the economic picture, data showed the American manufacturing sector grew for a 17th consecutive month in December, while construction spending increased again in November.

The global outlook also received a lift after data showed China’s factory inflation cooled in December, easing concerns the government would raise interest rates or take other steps to control growth.

At the close, the Dow Jones industrial average was 93.24 points, or 0.81 percent, higher, at 11,670.75, while the broader Standard & Poor’s 500-stock index gained 14.23 points, or 1.13 percent, to 1,271.87. The technology heavy Nasdaq added 38.65 points, or 1.46 percent, to 2,691.52.

American indexes ended 2010 with double-digit gains, with the S.& P. 500 recording its best December since 1991. The gains marked a recovery to levels before the collapse of Lehman Brothers in September 2008.

“The January effect I think is strong, following some momentum late in the previous year,” said Bryant Evans, investment adviser and portfolio manager at Cozad Asset Management in Champaign, Ill. Mr. Evans said in January many investors ask themselves, “What am I going to do with my cash? Part of it is the tax year is over, and corporations and people have a better idea of how much money they have to invest.”

For 2010, the S.&P. rose 12.8 percent, the Dow Jones industrial average climbed 11 percent, and the Nasdaq surged 16.9 percent.

From its July low, the S.&P. has risen 23 percent, helped by improving economic data, positive earnings reports and stimulus measures by the Federal Reserve.

In economic news, the Institute for Supply Management said Monday that its index of national factory activity rose to 57 points last month from 56.6 in November. That was in line with the median forecast of economists surveyed by Reuters. A reading above 50 indicates expansion in the sector.

And the Commerce Department said that construction spending rose 0.4 percent to an annual rate of $810.2 billion, the highest level since June, after rising by an unrevised 0.7 percent in October. November’s increase in construction outlays marked the third month of gains.

In corporate news, Bank of America said that it would put aside $3 billion in the fourth quarter related to poorly underwritten mortgages it sold to Fannie Mae and Freddie Mac after the bank agreed to settle claims over the repurchase of those loans. Bank of America shares were up 6.3 percent.

The aluminum maker, Alcoa, gained 2.65 percent after Deutsche Bank upgraded the stock to “buy” from “hold,” citing “growing optimism on both aluminum’s likelihood of higher prices and a belief that Alcoa has turned the corner from an operational point of view.”

European shares also rose, led by the German automaker, Porsche, which won a legal challenge from hedge fund groups.

With markets in Britain and parts of Asia closed, trading was very thin in many markets. The DAX in Frankfurt rose 1.1 percent, while the CAC 40 in Paris was up 2.5 percent.

Shares of Porsche rose nearly 14 percent in Frankfurt after a federal judge in the United States dismissed a lawsuit by hedge funds seeking more than $2 billion in damages.

In the bond market, United States Treasuries fell as the latest economic data showed improvements in the manufacturing sector and stocks rose . Analysts said anticipation of heavy corporate bond issuance this week also contributed to the sell-off in Treasuries. Yields on 10-year notes rose to 3.34 percent.

IFR Markets predicted “brisk activity” in the corporate bond market for the week. Berkshire Hathaway announced a $1.5 billion issuance deal Monday. Participants in corporate bond deals, including issuers and underwriters, often sell Treasury securities ahead of a deal pricing as part of a “rate-locking” trade to hedge against the interest rate risk on the coming deal. Prices came off their lows during midday trading after the Federal Reserve Bank of New York completed $7.79 billion in Treasury purchases. The New York Fed bought Treasuries with a maturity range of between seven and nine years. dominican republic divorce

“We’re seeing weakness tied to how positive equities have opened in the new year,” said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York.