U.S. stocks leap on first day of new year

The stock market got a big jump on a better year.

Stocks rose sharply Tuesday in the first session of 2012 after investors returned from the holiday and found encouraging economic reports from the United States and abroad.

The Dow Jones industrial average rose 179.82 points, or 1.47 percent, to 12,397.38, its highest close in more than five months. The Standard & Poor's 500 index was up 19.46, or 1.55 percent, at 1,277.06. The Nasdaq composite rose 43.57, or 1.67 percent, to close at 2,648.72.

The market may have gotten an extra boost from what's known as the January effect: Investors sell stocks at the end of the year to lock in losses for tax purposes, then come back in January and buy stocks again.

The effect could be more pronounced this year because the stock market was so volatile in 2011 and more investors were forced to take losses, said Sam Stovall, chief equity strategist at Standard & Poor's Capital IQ.

Money managers also usually get a fresh infusion of cash at the beginning of the year because workers who maxed out contributions to retirement accounts well before the previous year ended start contributing again.

These investors are back hunting for bargains, Stovall said: "Investors are a lot like dieters and look to January as a new beginning."