US stocks advanced in early trade on Monday, the first trading day of 2011, on speculation that the economic recovery will continue after stocks ended with double digit gains in the previous year.

The S&P 500 Index advanced 14.03 points, or 1.12 percent, to trade at 1,271.65 at 10:20 a.m. EDT. The Dow Jones Industrial Average gained 103.72 points, or 0.90 percent, to trade at 11,681.23. The Nasdaq Composite Index advanced 1.54 percent.

U.S. stock markets recorded good gains in 2010, with the S&P 500 rising about 12 percent, the Dow gaining more than 10 percent and Nasdaq advancing around 16 percent.

The Institute of Supply Management (ISM) Manufacturing Index, which measures the amount of manufacturing activity that occurred in the previous month, rose to 57.0 in December from 56.6 in November, while analysts expected a reading of 57.30.

Chinese manufacturing expanded at the slowest pace in three months in December with manufacturing purchasing managers index (PMI) declined to 53.9 in October from 55.2 in the previous month after the government tightened monetary policy to check spiraling inflation.

On the corporate front, shares of Office Depot surged 5.19 percent after it was upgraded to buy from neutral by Janney Capital Markets on Monday.

Bank of America Corp. advanced 4.57 percent after the bank said that it will take a nearly $2 billion charge in the fourth quarter related to the sale of Countrywide Financial Corp. home loans to Fannie Mae and Freddie Mac.

Barnes & Noble climbed 6.29 percent as its preliminary holiday same-store sales surged 9.7 percent on strong sales of its Nook e-reader device.

On Friday, US stocks finished 2010 with a whimper amidst sluggish holiday trading, although equity indices delivered quite a strong year in performance.

The euro declined 0.57 percent to 1.3308 against the dollar and the yen declined 0.68 percent against the greenback.

Crude oil futures advanced 1.16 percent to $92.44/barrel and gold futures rose 0.13 percent.

European stock markets are currently trading higher with DAX30 up by 89.08 points and CAC 40 up by 89.06 points.