Dow Jumps 100 Amid New Year Optimism

Cindy Perman|CNBC.com
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Stocks rebounded Friday as investors displayed some optimism for the new year, scooping up bargains in the consumer discretionary and energy sectors.

General Motors was the top gainer on the Dow, followed by Alcoa and Citigroup .

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.

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.

Still, some cautioned that there's more pain to come in the first half as companies continue to shake out losing investments in their earnings reports.

Financials were among the only declining sectors today.

JPMorgan and Goldman Sachs were off more than 1 percent, while Citigroup advanced.

"I think the financials are definitely going to be a laggard," Gary Hager, founder of Integrated Wealth Management, told CNBC. "But I really have good feelings that the financials, just like other parts of the market, will come from behind and will make a screaming run towards the end of the year."

A couple of high-profile deals closed: Bank of America said Thursday it has completed its $19.4 billion all-stock purchase of Merrill Lynch, while Wells Fargo said it has completed its $12.7 billion all-stock purchase of Wachovia.

Meanwhile, Fannie Mae believes that failed mortgage lender IndyMac has obligations to repurchase around $1 billion of home mortgagesthat failed to meet Fannie's standard, the Wall Street Journal reported, citing people familiar with the situation.

Investors were eager to see what President-elect Obama's economic-stimulus would look like.

Obama was set to meet with House Speaker Nancy Pelosi Monday to discuss a stimulus bill, the Washington Post reported.

The steel industry is also watching closely for details of the stimulus package, appealing for a "buy American" clause, hoping government orders will fill the void of the collapse in demand, the New York Times reported.

In morning trading, steel stocks such as Nucor and US Steel advanced.

Traders picked up some post-Christmas deals in the retail sector, with notable gains in Nordstrom and Macy's .

Chip stocks advanced even after a report showed chip sales plunged 10 percentin November, led by a sharp drop in memory-chip sales. Micron Technology and National Semiconductor were among the top gainers.

Energy stocks also advanced as crude oil was trading between $44 and $45 a barrel .

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