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Market participants piled into risky asset classes on Tuesday after a round of strong economic data boosted sentiment on Wall Street.

Today's Markets

The Dow Jones Industrial Average rallied 180 points, or 1.5%, to 12397, the S&P 500 jumped 19.5 points, or 1.6%, to 1277 and the Nasdaq Composite gained 43.6 points, or 1.7%, to 2649.

The rally was broad, with all but four of the 30 Dow components trading higher. Indeed, on a point basis, Tuesday represented the third-biggest gain the blue-chip average has ever made on the first day of trading of the year.

Alcoa (AA), Bank of America (BAC), JPMorgan Chase (JPM) and Caterpillar (CAT) led the charge, posting substantial gains. BofA, the second-biggest U.S. bank by assets, was the worst-performing blue chip last year, crumbling more than 50%, by contrast.

Eight blue chips touched multi-year highs on the day, according to data compiled by FOX Business. Among them, oil-giant Chevron (CVX) notched an all-time high of $110.99 a share before falling back 63 cents.

The top Dow components were also an indication of broader trends on the day: Financials, industrials and basic materials shares were some of the best performers on the S&P 500. Utilities were a notable exception, with the sector falling.

Also in corporate news, 3M (MMM) unveiled plans to scoop up Avery Dennison's (AVY) office and consumer products business for $550 million in cash. Both companies saw big gains in their stock prices on the news. 

Volatility was down 1.8%, as tracked by the CBOE's VIX. Meanwhile, Treasury yields climbed as traders dropped the safe-haven asset. The benchmark 10-year note yields 1.953% from 1.874%.

Strong Economic Data Lift Traders' Spirits

The Institute for Supply Management said the U.S. manufacturing sector expanded at a swifter pace in December from November. The ISM PMI gauge rose to 53.9 in December from 52.7 in November, topping estimates of 53.2. 

"The production index was very strong this month, suggesting that the drop in manufacturing production in November was just a temporary correction on an upward path," Nigel Gault, chief U.S. economist at IHS Global Insight wrote in a note to clients. Gault adds the growth was mostly domestically driven, helping the sector overcome headwinds caused by Europe's stumbling economic recovery.

A separate report from the Commerce Department showed construction spending jumping 1.2% in November from the month prior, zipping past estimates of a 0.5% gain. Spending is now at its highest level since June 2010 as that sector is rebounding from the recession. 

Other global reports were positive as well. A gauge of Chinese manufacturing activity showed the world's second-biggest economy began expanding in December after contracting the prior month. The country's official purchasing managers index hit 50.3 from the month from 49 in November. 

Germany, Europe's economic powerhouse, saw its unemployment rate fall 0.1 percentage point to 6.8%, striking a new record low unified Germany, according to Reuters. Manufacturing reports from Australia and India were also seen as strong, traders said. 

Also on the economic front, Federal Reserve officials will begin publishing interest rate forecasts later this month as the central bank looks to make its communications strategy more transparent, minutes released on Tuesday reveal. The market had nearly no reaction after the minutes were released. 

"There isn’t too much surprising in the minutes," Dan Greenhaus, chief global strategist at BTIG said in a report.

U.S. markets were closed on Monday, as were many world markets. However, Germany's DAX rallied 3% on the day, and the broad Euro Stoxx 600 jumped more than 1%. 

The euro jumped 0.9% to $1.305, while the U.S. dollar declined 0.63% against a basket of six world currencies. 

Commodities Surge

Energy futures were strongly to the upside, getting a boost from worries that mounting tension between the United States and Iran may ultimately lead to a supply shock and hopes that strong economic data may boost demand. 

The benchmark crude oil contract traded in New York jumped $4.13, or 4.2%, to $102.96 a barrel. Wholesale RBOB gasoline gained 9 cents, or 3.4%, to $2.749 a barrel. 

In metals, gold jumped $33.70, or 2.2%, to $1,601 a troy ounce. Silver was up $1.66, or 5.6%, to $29.53 a troy ounce. 

Corporate News

Verizon Communications (VZ) was cut to "buy" from "conviction buy" at influential investment bank Goldman Sachs.   

TOTAL (TOT) acquired a chunk of Chesapeake Energy's (CHK) Ohio shale operation for $2.32 billion.

Foreign Markets

European blue chips rose 0.83%, the English FTSE 100 jumped 2.3% to 5,700 and the German DAX gained 1.5% to 6,167. 

In Asia, the Japanese Nikkei 225 rose 0.67% to 8,455 and the Chinese Hang Seng soared 2.4% to 18,877.

Follow Adam Samson on Twitter @adamsamson.