The ISM’s manufacturing purchasing managers’ index rose to 55.9 last month, from 53.6 in November. December’s reading released today was above the 54.0

Alcoa and Boeing helped the Dow Jones Industrial Average gain 132 points, or 1.3%, to 10560, in early trading. Alcoa led the measure, up 3.7%.Boeing climbed 2.9%. One of the few components in the red, Home Depot eased 0.1%.

The tech-heavy Nasdaq Composite rose 1.4%. The Standard & Poor’s 500-share index climbed 1.2% as all of its components rose. The materials and energy sectors led the measure, boosted by rising commodities prices.

Reasserting a pattern that trailed off at year’s end, U.S. stocks climbed as the dollar fell. The U.S. Dollar Index, which represents the greenback against a basket of six other currencies, dropped 0.5%. The price of oil climbed above $81 per barrel and gold futures rose.

Hedge funds heavily involved in commodities and currencies that stepped back from trading in December have returned to the market.

The Dow’s climb was boosted Monday by data from the Institute for Supply Management showing a bigger-than-expected uptick in manufacturing activity during December, helped by improving production and ordering activity.

A report from the Commerce Department that U.S. construction spending fell more in November than economists had expected did little to check the market’s climb.

The gains also followed weekend remarks from Federal Reserve officials. Fed Chairman Ben Bernanke said in a speech Sunday that regulatory and supervisory policies, rather than monetary policy, were to blame for a rapid increase in U.S. house prices in the early parts of last decade and Fed Vice Chairman Donald Kohn said that tightening policy to head off perceived threats from asset price increases “could be expensive.”

However, Mr. Bernanke noted the Fed needs to “remain open” to employing higher interest rates to avert or pop future asset bubbles.

Investors will be watching the stock market’s movement this month closely, as January performance tends to be a bellwether for the year to come. January was a weak month for stocks in both 2008 and 2009, though last year’s rally from its March lows helped the Dow close up 19% for the year.

US Dollar is ready for monthly advance against the euro on speculation that manufacturing in the U.S. expanded for a fifth month and employers didn’t cut any jobs in December.

The yen was at a three-week low versus the euro on prospects the Bank of Japan will add to credit-easing measures to revive growth in the world’s second-largest economy.

A combination of higher U.S. yields and further signs of improvement in the labor situation in the U.S. should continue to underpin the dollar.  There is a stronger sense that 2009 was not as kind to the Japanese economy as it was to other parts of Asia.

The U.S. currency bought 92.39 yen at 6:04 a.m. in London from 92.44 yen in New York yesterday, when it reached 92.77 yen, the strongest level since Sept. 8. The dollar traded at $1.4370 per euro from $1.4339. The euro was at 132.76 yen from 132.54, after earlier touching 132.85 yen, the highest since Dec. 7.

The dollar has fallen this year against all of the 16 most- traded counterparts except for the yen as a global recovery eroded demand for the safety of the world’s reserve currency.