U.S. stock prices jumped higher on the first trading day of 2012 after new economic data showed gains in construction and manufacturing activity. Meanwhile, oil prices surged amid escalating tensions between the U.S. and Iran, which has threatened to close the strategically important Strait of Hormuz shipping channel.
U.S. manufacturing sector growth accelerated in December, as new orders, production and employment all increased, according to the Institute for Supply Management. U.S. construction spending rose 1.2%, the sharpest increase since June 2010, as both residential and nonresidential housing showed gains, according to the Commerce Dept.
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Taken together, the positive economic reports — both of which exceeded analyst expectations — suggest the U.S. economy is continuing to recover from the recession, despite continued high unemployment. Recent economic reports out of China and India have also been positive, fueling hopes that the global economy will avoid being dragged down by the ongoing debt crisis in Europe.
Both the blue-chip Dow Jones Industrial Average and the tech-heavy Nasdaq had risen nearly 2% in midday trading on Tuesday. But the positive news was overshadowed by continuing tension between the U.S. and Iran, which sent oil prices above $111 on Tuesday.
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Iran, which just completed naval exercises in the Persian Gulf, has threatened to close the strategically important Strait of Hormuz — through which 20% of the world’s oil flows — if the U.S. and its allies continue to press for economic sanctions aimed at punishing Iran for its continuing nuclear activity. Iran’s sabre-rattling escalated Tuesday as Gen. Ataollah Salehi, the commander of the Iranian armed forces, warned the USS John C. Stennis aircraft carrier, which left the Persian Gulf last week, not to return to the area.