Stocks Start 2011 With a Lift

NEW YORK (AP) — Stocks started 2011 with a lift Monday thanks to better news on the economy.

Manufacturing activity and construction spending both rose more than analysts were predicting. The Institute of Supply Management's index of manufacturing activity rose in December for the 17th straight month. Separately, the Commerce Department said construction spending rose 0.4 percent in November.

The Dow Jones industrial average jumped 125 points, or 1.1 percent, to 11,703 in afternoon trading.

The Standard and Poor's 500 index gained 17, or 1.4 percent, to 1,275. The Nasdaq composite rose 48, or 1.8 percent, to 2,701.

The gains were broad. All 10 company groups that make up the S&P index rose. Financial companies led the way with a 2.2 percent jump.

Bank of America Corp. shot up 5.3 percent to $14.05 after the bank settled a dispute with Fannie Mae and Freddie Mac over soured mortgage investments. That was the best performance among the 30 stocks that make up the Dow index. McDonalds Corp. had the largest fall, losing 0.1 percent to $76.70.

The better economic news dimmed the appeal of safer assets. The yield on the 10-year Treasury note, which rises as its price falls, moved up to 3.34 percent from 3.29 percent late Friday.

Small companies, which are considered riskier investments, surged. The Russell 2000, which tracks the performance of smaller stocks, jumped 1.9 percent.

Traders on Wall Street see early gains in January as a sign that that stocks will rise throughout the year. A gain in the S&P index during the first five days of January has preceded annual gains nearly 90 percent of the time, according to the Stock Trader's Almanac.

At the same time, smaller companies tend to do better early in the year than large ones, a phenomenon known as the January effect. Some of that has to do with traders buying the shares of risker small companies in a new year after selling underperforming shares in December to reap tax benefits, said Jeffrey Hirsch, the editor of the Stock Trader's Almanac.

In corporate news, Goldman Sachs Group Inc. gained 2.6 percent to $172.58 after the New York Times reported that it bought a stake in Facebook in a deal that valued the company at $50 billion. Facebook remains a private company, though its shares are traded on private stock exchanges.

Shares rose throughout Europe earlier in the day after a report showed that manufacturing in countries that use the euro expanded faster than analysts had forecast. The Euro Stoxx 50 index rose 0.6 percent. Benchmark indexes in France and Belgium each rose more than 2 percent.

The dollar was flat against an index of six heavily traded currencies.

Stocks in the U.S. ended mixed on Friday, which marked the last day of trading in 2010. For many investors, 2010 turned out better than expected. Every major stock market index in the U.S. increased by double digits.

The S&P 500, the market measure used by most professional investors, returned 15.1 percent after dividends. Historically, the index has returned an average of 10.01 percent a year, including dividends.

Stocks ended 2010 especially strong. The S&P gained 20 percent over the last four months of the year, capped by a 7 percent jump in December.