NEW YORK (CNNMoney) -- U.S. stocks rallied Tuesday, kicking off the new year on a high note, as investors welcomed upbeat reports on economic activity around the world.
The Dow Jones industrial average () jumped 180 points, or 1.5%, to end at 12,397. The S&P 500 ( ) gained 19 points, or 1.5%, to 1,277. The Nasdaq ( ) added 43 points, or 1.7%, to 2,649.
The gains came after reports on manufacturing growth in China and India came in better than expected over the weekend. On Tuesday, a report showed U.S. manufacturing activity grew at a faster rate in December.
U.S. markets were closed Monday for the New Year holiday.
"There were no major negative headlines out of Europe, and we had some data suggesting the global economy is expanding," said Dan Greenhaus, chief global strategist at BTIG.
Investors scooped up shares of companies that would benefit from a strengthening global economy.
Bank stocks, which were among the worst performing sectors last year, led the Dow higher. Bank of America ( , Fortune 500), Citigroup ( , Fortune 500) and JPMorgan ( , Fortune 500) all posted strong gains.
But traders say the market is vulnerable to concerns about the debt crisis in Europe, which has been the main driver of stock prices for several months.
"At least for today, there's no disaster in Europe," said Art Hogan, a managing director at Lazard Capital Markets. "The market remains focused on what's going on in the eurozone."
Meanwhile, oil prices surged more than 4% on continued anxiety over Iran's growing threat to shut down the Strait of Hormuz.
U.S. stocks finished little changed Friday, bringing to an end a year in which the S&P dropped just 0.04 point -- the smallest annual change in history. The Dow rose 5.5% for the year, while the Nasdaq lost 1.8%.
Any reading above 50 signals expansion in the sector.
The Commerce Department said construction spending jumped 1.2% in November, after a revised 0.2% decline in October. Analysts surveyed by Briefing.com expect construction spending to have risen by 0.5%.
Over the weekend, the Chinese government released its official reading on manufacturing activity, showing the sector expanded slightly in December, after contracting the month before. And on Monday, a report compiled by HSBC and Markit showed India's manufacturing activity picked up significantly during the month.
The manufacturing data "provides further evidence that global industrial production is likely to be stabilizing in the months to come," analysts at Barclays Capital wrote in a note to clients.
The Federal Reserve plans to give even more detailed forecasts about where it expects its key interest rate to be years from now, according to minutes of the Fed's December meeting released Tuesday.
Companies: Chesapeake Energy ( , Fortune 500) shares rose after the Oklahoma City-based energy company announced it completed a venture with an affiliate of French oil company Total ( ) that gives the French firm a 25% stake in more than 600,000 acres in eastern Ohio, an area rich in shale oil.
Mead Johnson Nutrition (newborn baby died of a rare bacterial infection that they suspected could be linked to the powder-based infant formula.) shares gained after two U.S. government agencies said they have completed their investigation of Enfamil and found the baby formula safe to use. The Food and Drug Administration and the Centers for Disease Control and Prevention had stepped in after a
World markets: European stocks also rose. Britain's FTSE 100 ( ) added 2%, the DAX ( ) in Germany added 1.5% and France's CAC 40 ( ) gained 0.4%.
The Hang Seng () in Hong Kong added 2.4%. Markets in Shanghai ( ) and Tokyo ( ) were both closed for an extended New Year holiday.
Oil for February delivery added $4.20, or 4.2%, to $103.03 a barrel.
Gold futures for February delivery rose $33.70 to end at $1,600.50 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.96% from 1.87% late Friday.
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