Wall Street has begun 2003 in buoyant mood, as traders returned from their New Year break to indications that US industry could be back on track.

The news came in a survey suggesting that manufacturing was expanding at its fastest rate since June.

The surge of more than 3% on all three key US equity indices was evidence of just how keen investors are to forget the disaster that was 2002.

People are wiping the slate clean with the new year here... I think 2003 will be an up year Owen Fitzpatrick Deutsche Bank Private Banking

The past year brought the third 12-month slide in stock prices in a row, reflecting sluggish economic growth, weak corporate profits, a spate of accounting scandals, and fears over war in Iraq.

But by the close of business on 2 January, the blue-chip Dow Jones industrial average was 265.89 points or 3.19% higher at 8,607.52, less than a point off the high for the day.

The broader S&P 500 had pushed ahead even further, up 3.32% to 909.03.

But leading the pack was the technology-rich Nasdaq Composite, 49.34 points or 3.69% firmer at 1,384.85.

In with the new

The New Year leap, dealers said, was the result of the Institute of Supply Management's manufacturing index, which had shot up to 54.7 in December from 49.3 the month before.

The reading was the best for six months, and the first time above 50 - the cut off point for expansion versus contraction - since August.

Recent economic reports, showing flagging consumer confidence and stubbornly high joblessness, have painted a gloomier picture.

But investors were keen to put 2002 behind them and start afresh - at least for today.

"People are wiping the slate clean with the new year here," said Owen Fitzpatrick, who heads the US equities group at Deutsche Bank Private Banking.

"I think 2003 will be an up year."

Stocks up, bonds down

But the fillip for equities was matched by a New Year slump in interest in government bonds.

When stock markets are in trouble and returns are thin on the ground, investors often turn to the safe haven of treasuries, as they are known, whose returns are slim but reliable.

The bond markets produced a 12% average return in 2002, while the Standard & Poors 500 equity index fell 24%.

But with money flowing into stocks on Thursday, the yield, or return, on bonds soared, indicating that they were becoming more difficult to sell.