Wall Street stocks rocketed higher on Tuesday, the first day of trading in the new year, fueled by a report that showed manufacturing strength in the American economy.
But traders and others noted that volumes were thin and that many wary investors remain sidelined, awaiting further direction from the euro zone or seeking clarity on the strength of the domestic economy.
And like last year, the myriad challenges facing the euro zone remained front and center for many investors, as leaders there warned of more trouble and turbulence ahead.
The Dow Jones industrial average closed with a jump of 180 points – a 1.5 percent gain. Earlier in the session, the Dow had soared by more than 2 percent.
Likewise, the Standard Poor’s 500-stock index gained 1.5 percent, and the Nasdaq composite index closed up 1.7 percent.
In a rare turn, Bank of America’s stock, which was hammered by investors for most of last year, was one of the strongest performers of the day. Its stock climbed 6 percent to $5.86, while Citigroup was up 8 percent to $28.46.
Some analysts pointed to a new report on American manufacturing as buoying investors’ spirits. The Institute for Supply Management, a trade group of purchasing managers, said its manufacturing index rose to 53.9 points in December from 52.7 in November. Readings above 50 indicate expansion.
Despite the stronger tenor of the report, other analysts remained cautious about drawing broader conclusions.
“The investor base got badly burned this time last year when many who were pessimistic in late 2010 switched to being optimistic in early 2011,” said Cary Leahey, senior economist at Decision Economics.
Investors raised their forecasts for economic growth and “upped their expectations of corporate earnings — and equity performance peaked in the second quarter and growth turned out to be about half of what people had hoped,” Mr. Leahey said.
Joseph Saluzzi, a co-head of trading at Themis Trading, said he didn’t feel the early move up in the session signaled a new, buoyant resolve among investors and that the relatively low trading volumes didn’t indicate a flood of sidelined cash moving into the markets.
“Nothing is really going to change until you start to see some real hard economic numbers that show growth. We’ve seen these sort of inklings before and they haven’t led to much in the past,” Mr. Saluzzi said.
Later in the week, more economic data will be released that investors hope will start to bring a bit more clarity to how strong the economy was running late last year.
Major retailers will release sales data, which will provide some gauge of consumer spending during the holiday season. And on Friday, the closely watched American employment figures for December will be released.
The early consensus in the market was that the economy generated another 150,000 jobs during the month. But even if true, some analysts said the market’s reaction could be muted.
“The market is primed for a good report by recent standards, but it will be a mediocre report by historical standards,” said Mr. Leahey.
Forecasts for much of the euro zone this year appear more bleak.
Chancellor Angela Merkel of Germany warned on New Year’s Eve that “next year will no doubt be more difficult than 2011,” as austerity measures across much of Europe put economic growth at risk.
Earlier Tuesday, Asian stocks rose. Hong Kong’s Hang Seng Index, on its first trading session of 2012, jumped 2.4 percent, South Korea’s Kospi index rose 2.7 percent and Australia’s S.P. ASX 200 gained 1.1 percent. Markets in Japan and mainland China remained closed for the extended New Year’s holiday.
Oil prices followed equities higher. Benchmark crude for February delivery rose $4.25 to $103.07 a barrel on the New York Mercantile Exchange.
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