Continued from page 1

Bank stocks and materials and industrial companies posted the largest gains. Alcoa, which produces aluminum, rose 6.7 percent, JPMorgan Chase rose 5.2 percent, and Bank of America rose 4.3 percent, the biggest winners among the 30 stocks in the Dow.

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

Investors seized on the latest signs of strength in the U.S. economy: Manufacturing expanded in December at the fastest rate in six months, and construction spending rose in November as builders spent more on single-family homes, apartments and remodeling projects.

There was also hope from Europe’s largest economy, Germany, which reported that the average number of people unemployed there 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.

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.”

The price of oil rose $4.13 to $102.96 per barrel in its first trading of 2012. Tensions grew over key Persian Gulf oil shipments after Iran warned the United States to stay out of the strategically important Strait of Hormuz waterway.

The dollar and Treasury prices fell as investors shed low-risk assets. Gold rose 2.2 percent. In other stock trading, the Nasdaq closed up 43.57, or 1.7 percent, at 2,648.72.

U.S. investors were also reacting to news they had missed out on during the holidays:

— On Dec. 30, a federal court delayed the implementation of new air-pollution regulations. Coal stocks did well Tuesday: Peabody Energy Corp. rose over 9 percent and James River Coal Co. soared close to 11 percent, while Alpha Natural Resources Inc. gained 8 percent.

— Last week, a JPMorgan analyst told clients that two wireless companies, Leap Wireless International Inc. and MetroPCS Communications Inc., could be targeted by AT&T or T-Mobile for takeovers. MetroPCS rose 8 percent Tuesday, and Leap rose over 6 percent.

Story Continues →