Stocks rallied on the first trading day of the new year, buoyed by a trifecta of news: A report that showed growth in the manufacturing sector, the dollar's pullback and an upgrade on Intel.
The Dow Jones Industrial Averageand S&P 500touched their highest levels in 15 months, and for the tech-heavy Nasdaq, 16 months.
The ISM's gauge of manufacturing showed growth for a fifth straight month, rising to 55.9in December from 53.6 in November. Economists had expected a more modest uptick to 54.1.
"ISM is good news. Pessimists repent!" Robert Brusca of FAO Economics, wrote in a note to clients. "There is nothing weak or phony about the pace of this recovery or about its breadth in the manufacturing sector," he said.
The ISM report could also bode welll for Friday's jobs report, said Jack Ablin, chief investment officer at Harris Private Bank.
"Good news among manufacturers should set the stage for improved hiring," Ablin wrote in a note to clients. "Historically, there's been a strong relationship between the ISM Hiring Index and the Bureau of Labor Statistic’s non-farm payroll index ... today’s report confirms an improved hiring trend."
The buzz is that Friday's report may show jobs were actually added to the economy in December — the first time that would've happened in two years. Estimates are around 30,000 to 40,000.
There are a few other big economic readings this week, including auto sales on Tuesday and chain-store sales on Thursday, which will offer a clearer picture of how retailers did over the crucial holiday-shopping season.
The morning chatter was also about comments from Ben Bernanke on Sunday: The Fed chairman said the central bank must be open to rate hikes as a possible means of popping asset bubbles. He was speaking at the American Economic Association's annual meeting.