Wall Street bounces higher on factory data

A pick-up in U.S. manufacturing activity last month gave Wall Street a shot in the arm Tuesday.

The Dow gained 167 points. The S&P 500 was up 26. The Nasdaq up 120.

U.S. factories in December were the busiest they've been in nearly 2-1/2 years. Demand for goods are up during the health crisis, according to the Institute for Supply Management's monthly survey, since Americans are unable to spend money on activities and services. But there is a downside: the report cites high absenteeism and factory shutdowns for sanitizing as two factors that are "limiting manufacturing growth potential."

Another factor for the markets: oil prices.

Crude jumped nearly 5 percent in the U.S. to just under $50 a barrel – a level not seen in nearly a year. A surprise announcement by Saudi Arabia that its plans to slash production by one million barrels of oil per day in February and March provided the boost.

Nick Colas of DataTrek Research predicts prices are poised to go even higher.

"The Saudi move is very helpful in terms of putting some support underneath oil prices and giving people a sense of where supply is going to be. So that's a critical part of the equation. But we're focused more on the demand side of the equation. And that's where the oil trade really, I think comes into its own. If you believe, as we do, in a pretty strong, robust economic recovery in 2021, then oil is going to have a lot more to go. Traditionally speaking, oil should go up between 60 and 80 percent from the lows in a cyclical recovery. And that would put us between 60 and 70 dollars a barrel sometime this year."

Those hopes lit a fire under the energy sector, which was the market's worst group last year. ExxonMobil jumped roughly 5 percent. ConocoPhillips gained nearly 6 percent.