Stocks rallied on the first trading day of the new year as manufacturing data at both home and abroad bolstered the case for the global economic recovery. As of market close, the blue-chip Dow Jones Industrial Average ($INDU) added 156 points, or 1.5%, to 10,584, while the broader S&P 500 ($INX) rose 18 points, or 1.6%, to 1,133. The tech-heavy Nasdaq Composite ($COMPX) gained 39 points, or 1.7%, to finish at 2,308.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%A better-than-expected reading on U.S. manufacturing activity helped boost shares because investors saw it as evidence that the recession is abating. The Institute for Supply Management's manufacturing index for December rose to 55.9% from 53.3% in November, reaching its highest level since April 2006. Any reading above 50% indicates that manufacturing is expanding. Also, manufacturing in China last month grew by the greatest amount since April 2004.

"Rallies earlier in the day in Asia and Europe on back of manufacturing growth in China . . . along with better-than-expected strength in Stateside manufacturing helped stocks move higher today," says Ticonderoga Securities analyst John Stoltzfus.

Among Dow components, the manufacturing data was particularly helpful to Alcoa (AA), Boeing (BA) and United Technologies (UTX), each of which rose at least 4% at one point during the session. At the sector level, basic materials, energy and financial stocks were the top performers, while the defensive sectors of utilities and consumer staples lagged.

The dollar reversed its December trend to finish lower, as the U.S. Dollar Index, which measures the greenback against a basket of major currencies, dropped 37 cents to $77.50. That helped lift shares of assets denominated in dollars. Oil rose rose $2.17 to close at $81.53 a barrel, while gold gained $22.9 to $1,119.10 an ounce. Meanwhile, frigid weather across a wide swath of the U.S. helped natural glass climb 30 cents to $5.83 per million British thermal units

Monday's strong equity gains came despite a disappointing reading on construction projects, which posted its seventh straight monthly decline. Construction spending fell 0.6% in November, the U.S. Commerce Department said Monday. Economists were looking for a 0.5% drop, according to a survey by Bloomberg News.

Shares also benefited from a weekend speech from Federal Reserve Chairman Ben Bernanke in which he said low interest rates didn't cause the housing bubble, and he downplayed the possibility of a rate hike in early part of 2010.