NEW YORK (CNNMoney.com) -- Wall Street surged Monday, starting off the new year on a positive note, after a report showed manufacturing activity is picking up and the weak dollar propelled commodity prices and stocks.
The Dow Jones industrial average (INDU) rallied 156 points, or 1.5%. The S&P 500 index (SPX) rose 18 points, or 1.6%. The Nasdaq composite (COMP) gained 39 points, or 1.7%. All three major gauges closed at 15-month highs.
"The fact that stocks are up so much today is an encouraging sign, but we need to see a few days of follow through," said Will Hepburn, chief investment officer at Hepburn Capital Management.
He said the first few trading sessions of a new year are typically positive and that he wants to see several more days of gains on strong trading volume before he's willing to say that the rally has recharged.
Stocks fell Thursday in a thinly traded session on the last day of 2009. All financial markets were closed Friday in observance of New Year's Day.
The last month of 2009 saw stocks churning in a narrow range, managing modest gains, but not really charging ahead like in earlier months.
The market lost some momentum in November and December, Hepburn said. That slowdown coincided with the dollar beginning to firm up and investors opting to close the books early after a difficult year.
A tumultuous 2009 ended with substantial gains. The S&P 500 gained 23.4%, the Dow industrials gained 18.8% and the Nasdaq composite gained 44%.
Stocks are up even more substantially since bottoming in March at the height of the financial market crisis. After closing at a 12-year low on March 9, the Dow gained 59% and the S&P 500 gained 65% through year end. After closing at a 6-year low on the same date, the Nasdaq gained 79%.
Tuesday brings reports on factory orders, pending home sales and auto and truck sales.
Economy: The Institute for Supply Management's manufacturing index rose to 55.9 in December from 53.6 in November, signifying a wider expansion in the sector. Economists surveyed by Briefing.com thought it would rise to 54.3. Stronger reports were also released in Asia, adding to bets that the global manufacturing sector is recovering.
A separate report from the U.S. government showed that construction spending fell 0.6% in November versus forecasts for a drop of 0.5%. Spending fell 0.5% in October.
On the move: Gains were broad based, with 27 of 30 Dow issues rallying, led by Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), IBM (IBM, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).
In other news, Swiss drugmaker Novartis AG plans to take control of Alcon (ACL) by paying $38.5 billion to buy the 77% of the eye care products maker it doesn't already own. The deal involved Novartis buying out Nestle SA's 52% stake in Alcon for $28 billion in cash and then merging with Alcon to access the remaining 23% held by minority shareholders.
Alcon shares fell nearly 6%.
Bernanke defends Fed policy: The Federal Reserve chairman said Sunday that the central bank's decision to keep interest rates very low between 2002 and 2006 was appropriate and not the cause of the housing market bubble.
He said regulation would have been a better way to avert the collapse that ensued when home prices crumbled, leading to massive foreclosures, billions in losses for banks and the worst financial crisis since the Great Depression.
The Senate is currently considering Bernanke's nomination by President Obama for another term as Fed chairman. The Senate Banking Committee already gave its approval last month. His current term ends on Jan. 31.
World markets: Asian markets gained, with the exception of the Hong Kong Hang Seng. In Europe, London's FTSE 100 rose 1.6%, France's CAC 40 added 2% and the German DAX rallied 1.5%.
Commodities and the dollar: The dollar tumbled versus other major currencies.
The weaker dollar gave a lift to dollar-traded commodities.
COMEX gold for February delivery settled up $22.10 to $1,118.30 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.
U.S. light crude oil for February delivery gained $2.15 to settle at $81.51 a barrel on the New York Mercantile Exchange, the highest close since October 2008.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.81% from 3.84% late Thursday. Treasury prices and yields move in opposite directions.
Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 1.02 billion shares. On the Nasdaq, advancers topped decliners by over three to one on volume of 1.92 billion shares.
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