Stocks Rally to Ring in the First Session of 2011

Stocks started the new year with a robust rally Monday, helped by encouraging corporate and economic news that pushed the broad market to a 28-month high. The S&P 500 ($INX) has now reclaimed nearly 90% of its losses from the bear-market bottom of March 2009.

The Dow Jones Industrial Average ($INDU) spent much of the day with a triple-digit gain before finishing up 93 points, or 0.8%, at 11,671. The blue-chip index last closed above that level in late August 2008, or just a couple weeks before the Lehman Brothers bankruptcy touched off the global financial crisis.

The broader S&P 500 rose 14 points, or 1.1%, to close at 1,272. The tech-heavy Nasdaq Composite ($COMPX) jumped 39 points, or 1.5%, to finish at 2,692, led by strong advances from Apple (AAPL) and Hewlett-Packard (HPQ).

Reassuring Economic Reports

Bank of America (BAC) led all Dow stocks with a gain of more than 6%. The nation's biggest bank by assets got a lift after it reached a settlement to buy back some claims on bad home loans sold to Fannie Mae (FNMA) and Freddie Mac (FMCC). Investor relief over the BofA agreement spread to the broader financial sector, which led the market with an increase of more than 2% on the day.

The first economic reports of 2011 were also reassuring. The Institute of Supply Management's index of manufacturing activity rose for its 17th straight month in December and was essentially in line with economists' median forecast. The ISM's manufacturing index increased to 57 in December from 56.6 -- its fastest growth pace in seven months. Key measures for new orders, inventories and production suggested the U.S. economic recovery will pick up speed in early 2011.

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"We saw significant recovery for much of the U.S. manufacturing sector in 2010," ISM Chairman Norbert Ore said in a statement. "The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle."

In other positive economic news, private construction spending rose 0.4% in November, the Commerce Department said, which exceeded economists' forecast. In corporate news, Dollar General (DG), the nation's biggest dollar-store retail chain, said it will add 6,000 jobs this year as it expands by 625 new stores this year.

The bond market continued to sell off as the yield on the benchmark 10-year Treasury note rose to 3.34 % from a previous close of 3.31%. (Bond yields and prices move in opposite directions.) Gold prices also retreated Monday, as futures traded on the Comex division of the New York Mercantile Exchange (CME) fell $7, or 0.5%, to settle at $1,414 an ounce.

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