US STOCKS-Wall Street starts new year with strong rally

                                
 * Market shrugs off dire factory data
                                
 * Investors look for signs of recovery
                                
 * Dow up 2.9 pct; S&P up 3.2 pct, Nasdaq up 3.5 pct
                                
 * For up to the minute market news, please click on
[STXNEWS/US].
 (Updates to close)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, Jan 2 (Reuters) - U.S. stocks started the new
year with a big jump on Friday as investors looked beyond yet
another piece of grim economic data on hopes that a recovery is
on the horizon after a disastrous 2008.
                                
 Analysts said investors seemed to be discounting economic
data, including Friday's release showing a sharp contraction in
factory activity, in anticipation of a turnaround in the second
half of 2009.
                                
 Those expectations helped push indexes to their highest
levels since early November, although volumes were light with
trade wedged between Thursday's New Year's holiday and the
weekend.
                                
 "The market is always discounting where it will be six to
nine months out," said Peter Jankovskis, director of research
at OakBrook Investments LLC in Lisle, Illinois. "We're getting
close to the point if people believe that things are getting
better it will be reflected shortly in the market.
                                
 The Dow Jones industrial average <.DJI> rose 252.81 points,
or 2.88 percent, to 9,029.20. The Standard & Poor's 500 Index
<.SPX> jumped 27.83 points, or 3.08 percent, to 931.08. The
Nasdaq Composite Index <.IXIC> gained 55.18 points, or 3.50
percent, to 1,632.21.
                                
 Analysts cautioned the light volume could have exacerbated
swings in the market.
                                
 Markets shrugged off a report by the Institute for Supply
Management that said U.S. factory activity fell to a 28-year
low in December, showing a more severe contraction than
economists had expected. For details, see [ID:nN02360428]
                                
 Chevron <CVX.N> was among the top boosts to the Dow as oil
prices rose above $46 a barrel amid tensions between Russia and
Ukraine and violence in the Middle East. Delays in Gulf Coast
tankers due to fog also lifted oil prices. For details, see
[ID:nN02364635]
                                
 Shares of Chevron rose 3.5 percent to $76.52, while Exxon
Mobil <XOM.N> gained 2.3 percent to $81.64. The S&P Energy
index <.GSPE> climbed 4.3 percent.
                                
 Big-cap tech stocks, including Apple Inc <AAPL.O> and
Microsoft Corp <MSFT.O>, which are seen as better positioned to
withstand a weak economy due to large cash reserves, helped
lift the Nasdaq.
                                
 Shares of iPod maker Apple rose 6.3 percent to $90.75 while
Microsoft added 4.6 percent to $20.33.
                                
 Consumer discretionary stocks rose after Starwood Hotels
<HOT.N> signed a confidentiality agreement with property
magnate Sam Zell's Equity Group Investments LLC, which could be
in preparation for Zell acquiring a larger stake in the
company.
                                
 Starwood shares surged over 16 percent to $20.80 while the
S&P Consumer Discretionary index <.GSPD> gained 4.7 percent.
                                
 The S&P Industrials index <.GSPI> rose 4.2 percent, as
Textron <TXT.N> rose 10.8 percent to $15.37 and Manitowoc
<MTW.N> gained 9.6 percent to $9.49.
                                
 Analysts also said investors were watching for clues of how
President-elect Barack Obama will try to shake the U.S. economy
out of its worst slump in decades.
                                
 Obama is due to meet leaders in Congress on Monday to
discuss his stimulus plan.
                                
 Some Republicans are worried that their Democratic rivals
could expand the plan to as much as $1 trillion.
                                
 General Motors Corp <GM.N> shares jumped 14 percent to
$3.65 after the U.S. government on Wednesday paid out the first
$4 billion in emergency loans to support the biggest U.S.
carmaker. A parallel rescue payment for privately held Chrysler
LLC was on hold until the new year. [ID;nN31357170].
                                
 Chrysler said it remained in talks with the U.S. Treasury
to finalize its own $4 billion loan agreement and expected to
receive its share of the funding soon.
                                
 Shares of Ford Motor Co <F.N> rose 7.4 percent to $2.46
even after it forecast a sharp drop in industry-wide U.S auto
sales for December. [ID:nN02373219]
                                
 Volume was slim on the New York Stock Exchange, where about
929 million shares changed hands, far below last year's
estimated daily average of 1.90 billion. On the Nasdaq, about
1.44 billion shares traded, well below last year's daily
average of 2.17 billion.
                                
 Advancers outnumbered decliners on the New York Stock
Exchange by a ratio of about 9 to 2, while on the Nasdaq about
eight stocks rose for every three that fell.
 (Editing by Leslie Adler)