Stocks rebounded Friday, pushing the Dow above the key 9,000 mark, as investors rang in the new year with optimism and scooped up bargains.
"I think closing the door on 2008 and putting that ugly year behind us created a natural sense of optimism," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
"The folks I've talked to think that this market is going to rally up to the inauguration and then fall," Ablin said. "I do think this a year where we get double-digit gains in stocks, I just don't think it's going to happen that quick. ... we still have to slog through some big issues."
The Dow Jones Industrial Average gained 258.30, or 2.9 percent, to close at 9,034.69. It was the first time the Dow has closed above 9,000 since early November. (The Dow last hit 9,000 intraday in early December.)
This comes on the heels of the best two-day year-end rally ever for the stock market.
For the week, the Dow gained more than 500 points, or 6.1 percent, snapping a four-week losing streak.
All 30 Dow components finished the day higher. General Motors was at the top of the pack, jumping 14 percent, followed by Alcoa and Citigroup . JPMorgan was the weakest Dow performer.
Ford shares gained 7.4 percent even as the auto maker said it sees no signs of a turnaroundin the first quarter.
The tech-heavy Nasdaq outperformed the broader market Friday, jumping 3.5 percent, while the S&P 500 rose 3.2 percent.
Leading the Nasdaq 100 were chip-maker Sandisk and GPS-gadget maker Garmin , up 15 percent and 14 percent, respectively.
Big-caps also posted solid gains, with Apple up 6.3 percent, Dell up 5 percent and Microsoft up 4.6 percent.
Stocks had briefly dipped after an ISM report showed manufacturing activity at a 28-year low.
The Institute for Supply Management reported its manufacturing index dropped to 32.4 in December from 36.2 in November, the lowest reading since June 1980. New orders hit a record low. Economists had expected a more modest drop in the headline number, pegging the gauge at 35.5, according to a Reuters survey.
December was the "slowest month in years," said one respondent, who works in the chemical-products industry.
Interestingly, another respondent said. "Business remains steady and sales are good." That person works in the computer and electronic-products industry.
The unemployment report next week will be a crucial indicator for the markets, which will be preparing for "ugly economic numbers," Peter Cardillo, chief economist, Avalon Partners, told CNBC.
Analysts expect to see that another 485,000 jobs were cut from nonfarm payrolls, which would push the total above 2 million jobs lost in 2008.
U.S. auto makers report December sales on Monday — Ford projected a 35-percent drop industrywide in what could be the worst month for auto makers on record.
Also next week, we'll get the first snapshot from retailers on December sales, a crucial month that includes the holiday season, which could also prove to be pretty ugly.
Market pros were optimistic about investment opportunities for 2009 after stocks shed 34 percent in 2008, logging their worst year since 1931. In fact, some market pros say stocks could gain more than 20 percentthis year, according to CNBC's Trillion Dollar Survey.