By Samantha Pearson in New York
Rising commodity prices fuelled a burst of optimism across Wall Street on Monday, lifting miners and oil producers sharply higher during the first trading session of the year.

The market extended its early gains after data showed that US manufacturing activity last month had climbed to the highest level in more than three years.

The S&P 500 jumped 1.6 per cent to 1,132.99, closing at its highest level since October 2008. The Dow Jones Industrial Average added 1.5 per cent to 10,583.96 and the Nasdaq Composite was up 1.7 per cent at 2,308.42.

“The ISM [manufacturing] report was more encouraging news and we seem to be on track for a recovery,” said Bruce McCain, chief investment strategist at Key Private Bank. “Towards the end of the year, a number of money managers were trying to protect gains. In that protective mode, people were not as aggressive about deploying money into equities. But now, when you take the gloves off, we’ll see what investors’ true inclinations are in terms of what they think about the economy and which sectors they put their money into.”

The price of US crude jumped above $80 a barrel following encouraging Chinese manufacturing data, helping to lift the S&P 500 energy sector 2.8 per cent.

Shares in Chesapeake Energy climbed 8.5 per cent to $28.09 after Total, Europe’s third-largest oil producer, agreed to buy a quarter of the company’s assets in Texas.

The joint venture, which is worth up to $2.25bn, will allow Total to expand into the US shale gas business.

Barron’s also forecast that Chevron’s share price could rally as much as 20 per cent over the next 12 months as oil prices rise.

The recommendation helped the country’s second-largest energy producer gain 2.7 per cent to $79.06.

Deutsche Bank gave an extra boost to CVR Energy and Tesoro, raising the oil refiners from “hold” to “buy”. CVR gained 8.3 per cent to $7.43 while Tesoro, which was identified as a potential takeover target, was up 9.3 per cent at $14.81.

Metal prices also rose sharply, lifting Alcoa 3.3 per cent to $16.65. The steepest daily increase in gold prices for more than two months boosted shares in Barrick Gold, the world’s largest producer of the metal, 2.6 per cent to $40.39.

Boeing, the world’s second-largest manufacturer of commercial aircraft, helped to lift the industrials sector 1.7 per cent higher.

Barclays Capital raised the stock to “overweight”, saying that the company was in a good position to benefit from recovery after resolving disputes with its suppliers and completing a successful 787 test flight.

Jesup & Lamont also upgraded the manufacturer from “hold” to “buy”, making Boeing its top pick in commercial aerospace. Its shares were up 3.8 per cent to $56.18.

Novartis surprised investors with a plan to buy out minority shareholders in Alcon, the US eyecare company, for the equivalent of $11.2bn in equity. The Swiss drugmaker had already agreed to purchase Nestlé’s majority stake in the company. The announcement sent shares in Alcon down 5.7 per cent to $154.98.

In the financial sector, Credit Suisse raised Morgan Stanley from “neutral” to “outperform” on the same day as UBS raised its recommendation on the bank from “neutral” to “buy”.

Analysts said this year would prove to be an “inflection point” for Morgan Stanley, the sixth-biggest US lender by assets, as it benefited from its joint venture with Smith Barney. Its shares rose 4.4 per cent to $30.91. UBS also gave a boost to casino stocks, raising both Las Vegas Sands and Wynn Resorts from “neutral” to “buy”.

Las Vegas Sands would be likely to beat gaming revenue estimates this year thanks to its Macau business, the bank’s analysts predicted.

Its shares, which surged about 150 per cent last year, were up 11.2 per cent to $16.62. Wynn gained 9.8 per cent to $63.96 after analysts recommended the company on the basis of its attractive valuation.

Intel, the world’s largest chipmaker, gained 2.4 per cent to $20.88 after hitting its highest intraday price for almost three months.

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