Wall Street higher to start New Year

NEW YORK (Reuters) - Stocks started the new year higher on Friday as investors looked beyond another piece of grim economic data and hoped that an economic recovery is on the horizon.

Analysts said investors are focusing on stocks such as industrials that often lead the eventual recovery, which has helped push the Nasdaq and broad S&P 500 indexes to their highest levels since mid-November.

"The market has been taking bad news in stride, that is a very positive sign," said Tim Ghriskey, Chief investment officer of Solaris Asset Management in Bedford Hills, New York.

The Dow Jones industrial average <.DJI> was up 189.72 points, or 2.16 percent, to 8,966.11. The Standard & Poor's 500 Index <.SPX> gained 20.86 points, or 2.31 percent, to 924.11. The Nasdaq Composite Index <.IXIC> added 39.52 points, or 2.51 percent, to 1,616.55.

Volume was light after the New Year's holiday and ahead of the weekend, which analysts cautioned could exacerbate swings in the market.

The markets briefly turned negative after the Institute for Supply Management said U.S. factory activity fell to a 28-year low in December, showing a more severe contraction than economists had expected.

Chevron was among the top boosts to the Dow, as oil prices touched $46 a barrel after fog delayed Gulf Coast tankers. Tensions between Russia and Ukraine as well as violence in the Middle East also provided a lift to oil prices.

Shares of Chevron rose 2.2 percent to $75.60 while Exxon Mobil gained 1.1 percent to $80.68. The S&P Energy index <.GSPE> climbed 3.3 percent.

Big-cap tech stocks, including Apple Inc and Microsoft Corp 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 4.9 percent to $89.50 while Microsoft added 3 percent to $20.02.

Consumer discretionary stocks rose after Starwood Hotels 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 nearly 15 percent to $20.51 while the S&P Consumer Discretionary index <.GSPD> gained 3.5 percent.

The S&P Industrials index <.GSPI> rose 3.5 percent, as Textron rose 9.8 percent to $15.24 and Manitowoc 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.

GM 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 Chrysler LLC was on hold until the new year.

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 rose 4.4 percent to $2.39 despite forecasting a sharp drop in U.S. auto sales for December.

(Editing by Tom Hals)

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