Sizzling start to New Year

NEW YORK (CNNMoney.com) -- Stocks surged Wednesday, pushing the Dow Jones industrial average to its highest point ever in a buoyant first trading day of 2007.

A 3 percent drop in oil prices, upbeat economic news and strength in retailers such as Home Depot and Wal-Mart Stores all fed the momentum.

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The Dow Jones industrial average (up 110.63 to 12,573.78, Charts) jumped about 100 points, or nearly 0.8 percent, about 2-1/2 hours into the session, hitting a fresh trading high.

The broader S&P 500 (up 9.28 to 1,427.58, Charts) index added nearly 0.7 percent and the Nasdaq (up 34.95 to 2,450.24, Charts) composite gained 1.5 percent.

Stocks slipped Friday at the end of a strong year on Wall Street. Financial markets were closed Monday for New Year's and Tuesday for a day of mourning for President Ford.

After the unusual four-day market closing, investors were anxious to get back to work Wednesday.

"It's a big day on Wall Street," said Jack Ablin, chief investment officer at Harris Private Bank.

"I think there was pent-up demand from the long weekend," he said. "Investors probably reviewed their holdings and decided they wanted to put some money to work at the start of the new year."

The big drop in oil means lower costs for many companies, and higher earnings. U.S. light crude oil for February delivery slumped $2.26 to $58.79 a barrel on the New York Mercantile Exchange.

In corporate news, Home Depot (up $1.34 to $41.50, Charts) CEO Robert Nardelli is leaving the company. Nardelli, who was criticized for the size of his pay package and for his management style, will leave with a $210 million severance package. (Full story).

Home Depot shares jumped 3 percent, while rival Lowe's (up $1.05 to $32.20, Charts) also gained about 3 percent.

In addition to Home Depot, fellow Dow retailer Wal-Mart Stores (up $1.34 to $47.52, Charts) jumped after saying December sales at stores open a year or more rose more than expected.

Gains were broad-based, with 25 out of 30 Dow stocks advancing. Climbers included Merck (up $1.27 to $44.87, Charts), Intel (up $0.58 to $20.83, Charts), DuPont (up $1.01 to $49.72, Charts) and Boeing (up $1.31 to $90.15, Charts).

A notable decliner was Exxon Mobil (down $1.85 to $74.78, Charts), which slumped in response to the steep selloff in oil prices. Other oil stock losers included Valero Energy (down $0.81 to $50.35, Charts) and Sunoco (down $1.31 to $61.05, Charts).

Market breadth was positive. On the New York Stock Exchange, winners trounced losers by almost three to one on volume of 930 million shares. On the Nasdaq, advancers topped decliners two to one 1 billion shares changed hands.

Treasury prices were barely higher, giving back bigger morning gains. The yield on the benchmark 10-year note stood at 4.67 percent. Bond prices and yields move in opposite directions.

In global trade, major Asian markets ended higher and European markets rose in late trade.

On the economic front, the Institute for Supply Management's manufacturing index rose to 51.4 in December, topping forecasts for a rise to 50. The index stood at 49.5 in November. A reading below 50 indicates contraction in the sector.

November construction spending fell 0.2 percent, versus forecasts for a drop of 0.6 percent.

Minutes from the December Federal Reserve policy meeting were due later Wednesday.

Investors were still riding high on the momentum of 2006, the fourth up year in a row for the S&P 500 and Nasdaq composite. It was the third of four upbeat years for the Dow, after the blue-chip average fell slightly last year.

The S&P gained 13.6 percent last year and the Nasdaq gained 9.5 percent. The Dow industrials gained 16.3 percent.

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