US stocks leap on first day of new year |

US stocks leap on first day of new year

NEW YORK (AP) – The stock market got a big jump on beating last year’s flat performance.

Stocks rose sharply Tuesday in the first trading of 2012 as investors returning from the holiday were encouraged by positive economic reports from the United States and around the world.

The Dow Jones industrial average rose more than 260 points in morning trading before sliding back at midday. At 12:15 p.m. EST, the Dow was up 214 points, or 1.7 percent, at 12,430.

The market could be getting an extra boost this year from what is traditionally called the January effect: Investors sell stocks at the end of the year to lock in losses for tax purposes, then come back in January and buy stocks to reinvest.

The effect could be more pronounced this year because the stock market was so volatile in 2011 and more investors were forced to take losses, said Sam Stovall, chief equity strategist at Standard & Poor’s Capital IQ.

Those investors are back hunting for bargains.

“Investors are a lot like dieters and look to January as a new beginning,” Stovall said.

Bank stocks and materials and industrial companies posted the largest gains. Bank of America rose 4.9 percent and JPMorgan Chase 4.6, the biggest winners among the 30 stocks in the Dow.

The gains were broad. All but three of the 30 Dow stocks were higher. Of the 10 major categories of stocks in the S&P 500 index, one, utilities, was lower. Utilities are traditionally conservative stocks to own.

In the latest sign of strength in the U.S. economy, manufacturing expanded in December at the fastest pace in six months. Construction spending jumped in November as builders spent more on single-family homes, apartments and remodeling projects.

Germany, Europe’s largest economy, reported that the average number of people unemployed last year was the lowest in two decades. Germany has an unemployment rate of 6.6 percent, compared with 8.6 percent in the United States.

And a Chinese manufacturing index rose in December, reversing a November slide and raising hopes that China’s economic slowdown is under control.

In other market activity Tuesday, the S&P 500 was up 22 points at 1,279, and the Nasdaq rose 47 to 2,652.

January is a fairly good predictor of the year to come for U.S. stocks. In the past 83 years, the full year has taken its direction from the first month 60 times, according to S&P.

The first day is less useful, though. If you were to bet on whether the market would finish the year up or down based on how it performed the first day, you would be right only about half the time.

Tuesday was on track to be the fourth straight year of market gains on opening day. On Jan. 3, 2011, the S&P rose 14 points, but the market finished the year almost exactly where it began. The S&P 500 ended the year down a sliver – 0.04 of a point.

The economic reports overshadowed, at least for a day, concerns in the global markets about the European debt crisis, which will probably be the main catalyst for markets in the weeks ahead.

Earlier Tuesday, the government of debt-crippled Greece warned that it would have to ditch the euro currency if the details of a second international bailout worth $169 billion can’t be worked out.

Investors have been afraid that a Greek exit from the euro currency union would further disrupt the Greek economy and cause heavy losses for European banks that hold Greek government debt, perhaps triggering a global financial crisis.

The second Greek bailout was approved last October, but Greece still has to persuade its creditors, including banks and investment firms, to take steep losses on their holdings of Greek debt.

Greece also says more tax increases and spending cuts may be required. A spokesman for the Greek government, Pantelis Kapsis, said negotiations in the next three or four months with international debt monitors will “determine everything.”

In other corporate news:

– Chesapeake Energy Corp. rose 4 percent after the energy company sold a part of its Ohio oil and gas business to a unit of French energy company Total SA for $2.32 billion.

– Rambus Inc. jumped 8 percent after the technology licensing company raised its fourth-quarter revenue forecast to $83 million from an earlier range of $66 million to $71 million.

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