A separate report on Monday showed construction spending hit a five-month high in November, more evidence that the U.S. economy picked up steam in the final quarter of last year.
"These good numbers continue the story of an economic recovery," said David Carter, chief investment officer at Lenox Advisors in New York. "For the market in general, we're off to a new start and people are optimistic."
Monday's data dovetailed with strong readings on employment and consumer spending over the last few months of 2010, leading economists to bet a fragile U.S. recovery may this year finally turn into self-sustaining growth.
Congress' decision last year to extend U.S. tax cuts has also aided consumers and lifted U.S. stock indexes, and economists say that may convince the Federal Reserve to end a $600 billion stimulus program as planned in mid-2011, the Reuters report noted.
"We're starting off the new year on a strong foot," said Zach Pandl, U.S. economist at Nomura Securities, adding the manufacturing report "suggests the economy is accelerating and growth should be 3 percent in the first quarter."
European factory output also accelerated in December while growth in China and India slowed but remained robust. A healthy global economy is good news for U.S. exporters.
Construction spending was lifted by investment in public projects, which rose 0.7%, while private investment rose to the highest level since June despite continued housing market weakness.
TAPPI
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