By Akane Otani and Mike Bird

The Dow Jones Industrial Average climbed Tuesday, the first major trading day of the new year.

A surge in shares of financial companies helped the Dow industrials jump more than 150 points shortly after the opening bell, bringing the blue-chip index within 100 points of the never-before-reached 20000 level. But as banks pared their early gains, so too did the Dow industrials.

The Dow industrials rose 119 points, or 0.6%, at 19882, after having slipped in the last trading session of 2016. The S&P 500 added 0.9%, boosted by shares of telecom and health-care companies, and the Nasdaq Composite rose 0.9%.

U.S. stocks capped off 2016 with their best performance in years, with the blue-chip index rising by double-digit percentages to log its biggest gain since 2013. Many analysts and investors expect the stock market rally to continue, citing a rebound in corporate earnings, an acceleration of U.S. economic growth, and prospects of tax cuts and fiscal stimulus under the new administration.

"We ended the year with nothing to [damp] the optimism about the 2017 economic outlook," said Kit Juckes, global head of foreign-exchange strategy Société Générale SA.

Still, some investors caution that stock valuations appear stretched, and that the market's year-end run may have been overdone. Headwinds like the strengthening dollar and the potential for protectionist policies -- both of which could hurt multinational companies -- could offset the tailwinds of a growing economy and improving corporate earnings.

"We're in the modestly positive camp," said Jason Pride, director of investment strategy for Glenmede. "We were surprised by the market's strength going into the end of the year, which makes our mindset a bit more cautious heading into 2017."

On Tuesday, health-care shares were among the best performers in the S&P 500, rising 1.4%. Amgen, Gilead Sciences and Allergan each rose more than 2%.

Telecom and tech lifted the index as well, rising 1.9% and 0.9%, respectively.

Meanwhile, it was a bumpy day of trading for General Motors, which on Tuesday became the latest corporation to come under attack by President-elect Donald Trump.

Early Tuesday, Mr. Trump criticized the car maker on Twitter for sending some of its Chevrolet Cruze cars produced in Mexico to U.S. dealerships. Shares initially slid in premarket trading, but recovered to recently trade up 0.5%.

While major indexesgained, developed government bonds continued their slide, with the yield on the U.S. 10-year Treasury note climbing to 2.452% Tuesday from 2.446% previously, according to Tradeweb. Yields rise as bond prices fall.

Expectations of inflation and faster economic growth have pressured long-term government bonds, as they erode the value of their fixed returns.

Elsewhere, banks and oil-and-gas companies led the Stoxx Europe 600 index 0.7% higher and into bull-market territory, marking a gain of 20% from its previous low. London's FTSE 100 rose 0.5%, notching its fourth consecutive record close -- its longest such streak of records since 1999, according to the WSJ Market Data Group.

Shares in Asia closed higher, with Hong Kong's Hang Seng climbing 0.7% and South Korea's Kospi index up 0.9%. Japan's Nikkei 225 was closed for a holiday.

Write to Akane Otani at akane.otani@wsj.com and Mike Bird at Mike.Bird@wsj.com

(END) Dow Jones Newswires

January 03, 2017 16:25 ET (21:25 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.