Telecommunications stocks were higher, with Sprint Nextel up 28 cents to close at $4.51, a gain of more than 6 percent. Consumer discretionary stocks also made strong gains.  The three sectors rose shortly after the market opened and held their gains as new economic figures were released, showing stronger performances in manufacturing and construction.  The Dow Jones industrial average was up 93.24 points, or 0.81 percent, to 11,670.75. The previous high was on Dec. 29, 2010, at 11,585.4.  The Standard & Poor’s 500-stock index rose 14.25 points, or 1.13 percent, to 1,271.89, the highest close since 1,274.98 on Sept. 3, 2008. The previous high was also on Dec. 29, when it closed at 1,259.78, when it was the highest since Sept. 8, 2008.  The Nasdaq was up by 38.65 points, or 1.46 percent, at 2,691.52.  “We are in a bull market for sure,” said John Lekas, senior portfolio manager, for Leader Capital. He said the market was unlikely to slow, given that some investors, such as small retail investors, were latecomers hesitant about the economic data.  “A lot of people were looking at higher unemployment, and saying ‘I don’t believe the rally,’ ” he said. But he contended domestic economic data had less to do with the current market than the success that American companies were having overseas.  “The fundamentals in the U.S. are disconnected from the equity market, and the reason is the predominance of earnings growth is coming from overseas and not from the U.S. anymore,” he said.  The Institute for Supply Management said that its index of national factory activity expanded in December for a 17th consecutive month. The index rose to 57 in December, from 56.6 in November. A reading above 50 indicates expansion.  American manufacturers that exported goods, and companies in sectors such as automobiles and food, benefited from growth, although industries related to housing continued to struggle.  The results Monday were in line with forecasts by analysts, who consider manufacturing crucial to a recovery. They say it also offers clues on how businesses are rebuilding inventories, and on employment, new orders and consumer demand.  “All in all, the nation’s factories appear to be facing a bright outlook in 2011,” said Joshua Shapiro, the chief United States economist for MFR Inc.  The Institute for Supply Management report said businesses representing 11 of 18 manufacturing sectors reported growth in December, including those in apparel, leather and related products, metals, machinery, and computers and electronics. Contractions were reported in minerals, paper, printing and miscellaneous manufacturing industries.  Strong readings in new orders and production are expected to create momentum in the first quarter of 2011, said Norbert J. Ore, the chairman of the association’s survey committee.  The institute’s index for new orders grew to 60.9 in December from 56.6 in November, while production rose to 60.7 from 55. At the same time, inventories grew more slowly, indicating that the increase in output was not just piling up in stockrooms.  Employment, however, contracted to 55.7 in December from 57.5 in November.  American manufacturers were benefiting from changes in world markets. Global demand, especially in Europe and Asia, and a weaker dollar helped American exporters, while Asian manufacturing growth put upward pressure on commodity prices that was reflected in higher producer prices in the United States, said Daniel J. Meckstroth, the chief economist for the Manufacturers Alliance/MAPI. A Commerce Department report showed construction spending hit a five-month high in November. It indicated construction spending increased 0.4 percent to an annual rate of $810.2 billion, the highest level since June, after rising by an unrevised 0.7 percent in October. The November increase in construction outlays was the third straight month of gains.  Economists polled by Reuters had forecast a gain of 0.2 percent in November.  The Treasury’s 10-year note fell 10/32, to 94 3/32. The yield rose to 3.33 percent Monday, from 3.29 percent late Friday.  Eric Dash and Ben Protess contributed reporting.  A version of this article appears in print on January 4, 2011, on Page B3 of the New York edition with the headline: Wall Street Starts Year With Surge In Shares. Order Reprints| Today's Paper|Subscribe
Shares got a lift from the “January effect,” when fund managers are no longer engaged in year-end window dressing and focus on stocks they find attractive.