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U.S. Steel drops after Biden halts Nippon Steel ( NISTF ) deal

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Liquor stocks fall in the wake of US surgeon general's

warning

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December manufacturing PMI hits nine-month high

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Indexes up: Dow 0.77%, S&P 500 1.24%, Nasdaq 1.72%

(Updates to afternoon)

By Stephen Culp

NEW YORK, Jan 3 (Reuters) - Wall Street bounced back on

Friday as investors neared the end of a holiday-shortened week

that also rang in a new year, which brought with it expectations

of additional rate cuts from the Federal Reserve and policies

favoring business from the incoming administration.

All three major U.S. stock indexes were sharply higher, with

megacap growth companies, such as Tesla and Nvidia ( NVDA )

, providing much of the muscle to the upside and putting

the Nasdaq out front.

Even so, all three indexes are on track to show modest

declines for the week, with the S&P 500 and the Dow set for

their third weekly losses in four.

A multi-session selloff put a dour cap on what was a banner

year for the equities market, as continued momentum of

artificial intelligence technology and the U.S. Federal

Reserve's first policy rate cuts in three-and-a-half years

helped fuel double-digit gains in 2024.

"After the late-in-the-year weakness, and a very oversold

market, we finally saw some buyers step in," said Ryan Detrick,

chief market strategist at Carson Group in Omaha. "Obviously the

past week-and-a-half has been disappointing for the bulls, but

volume has been light and there hasn't been a lot of news."

"Let's just remember, starting next week, on Monday, that's

when a lot of the big money managers come back to the desk,"

Detrick added. "We'll see if this bullish trend can continue."

On the economic front, the Institute for Supply Management's

(ISM) purchasing managers' index (PMI) surprised to

the upside by gaining 0.9 point to 49.3, its highest reading

since March, nudging ever closer to expansion territory.

A run of fairly robust economic data has called into

question the need additional interest rate cuts from the Fed in

the near term due to the possibility of re-igniting inflationary

pressures.

Richmond Fed President Thomas Barkin said the U.S. 2025

economic outlook was positive, despite uncertainty about the

impact of trade and other policies that may be pursued by the

incoming Trump administration.

The newly elected Congress convened for its first session on

Friday, and U.S. President-elect Donald Trump is expected to

take the oath of office on Jan. 20.

While Trump's proposals - which include cutting corporate

taxes, easing regulations and imposing tariffs - could boost

corporate profits and energize the economy, but they also run

the risk of placing upward pressure on inflation.

The Dow Jones Industrial Average rose 324.36 points,

or 0.77%, to 42,716.63, the S&P 500 gained 72.44 points,

or 1.24%, to 5,941.11 and the Nasdaq Composite gained

331.19 points, or 1.72%, to 19,612.44.

All 11 major sectors in the S&P 500 were higher, with

consumer discretionary stocks enjoying the largest

percentage gain after Thursday's rout.

With fourth-quarter earnings season still several weeks

away, analysts see S&P 500 earnings growth, on aggregate, of

9.6% year-on-year, according to LSEG data.

U.S. President Joe Biden blocked the proposed sale of U.S.

Steel to Japan's Nippon Steel ( NISTF ) for $14.9 billion,

citing national security concerns. U.S. Steel's shares were last

down 5.6%.

Microsoft ( MSFT ) shares gained 1.3% after the company said

it would invest $80 billion on AI-enabled data centers in fiscal

2025.

Alcohol-producers lost some ground after U.S. Surgeon

General Vivek Murthy said that alcoholic drinks should carry a

label warning of cancer risks. Molson Coors ( TAP/A ) and Brown

Forman ( BF/A ) were off 3.7% and 1.3%, respectively.

Advancing issues outnumbered decliners by a 3.01-to-1 ratio

on the NYSE. There were 68 new highs and 72 new lows on the

NYSE.

On the Nasdaq, 3,121 stocks rose and 1,165 fell as advancing

issues outnumbered decliners by a 2.68-to-1 ratio.

The S&P 500 posted 2 new 52-week highs and 11 new lows while

the Nasdaq Composite recorded 54 new highs and 29 new lows.