NEW YORK, Jan 3 — Wall Street stocks rallied on the first trading day of the year, picking up in spite of recession warnings and expectations of elevated interest rates.

Shortly after the start of the session, the Dow Jones Industrial Average bounced 0.4 percent to 33,275.45.

The broad-based S&P 500 jumped 0.6 percent to 3,864.02, and the tech-rich Nasdaq Composite Index surged 1.0 percent to 10,565.98.

The comeback follows US stocks’ worst annual showing since 2008 last year, on the back of decades-high inflation and steep interest rate hikes by the central bank to cool the economy.

"What we have this morning is some bargain-hunting activity” in both the stock and bond market, said Patrick O’Hare of Briefing.com in a note.

But International Monetary Fund chief Kristalina Georgieva has warned that the organisation expects a third of the world economy to be in recession this year — pointing to a disconnect between the strength in markets and economic conditions.

Markets will have more data to digest later this week, as minutes from the latest Federal Reserve policymakers’ meeting are released tomorrow, along with key employment data at the end of the week.

The Fed raised the benchmark lending rate seven times last year as it embarked on a forceful campaign to rein in inflation, and has signalled it will stay the course in battling price increases. The meeting minutes could give more hints on the direction central bankers are headed. — AFP