* U.S. manufacturing growth sturdy in June
* Dow fails to hit 17,000 milestone
* Dow up 0.8 pct; S&P 500 up 0.7 pct; Nasdaq up 1.1 pct (Updates to close)
By Angela Moon
NEW YORK, July 1 (Reuters) - The Dow and the S&P 500 closedat record highs on Tuesday as manufacturing activity picked upin the United States and Asia and increased optimism about theglobal economy's health.
The blue-chip Dow Jones industrial average came close to the17,000 milestone in early afternoon trading, rising slightlyover 1 percent to 16,998.70. The rally - led by IBM (NYSE: IBM - news) , up2.8 percent at $186.35, and Visa Inc (Xetra: 3V64.DE - news) , up 1.7 percent at$214.25 - marked the first trading day of both the third quarterand the second half of 2014. The U.S. stock market will beclosed on Friday for the Independence Day holiday on the Fourthof July.
Financial data firm Markit (Stuttgart: A1139A - news) said its final U.S. ManufacturingPurchasing Managers Index rose to 57.3 in June, the highest since May 2010, although it was slightly lower than thepreliminary read of 57.5.
A report from the Institute for Supply Management showed itsindex of national factory activity was at 55.3, little changedfrom May's 55.4 reading.
"The basic message is that it's pretty much the same levelas May so that's very positive news for the U.S. manufacturing,"said Anthony Karydakis, chief economic strategist at MillerTabak in New York.
The Dow Jones industrial average rose 129.47 pointsor 0.77 percent, to end at 16,956.07. The S&P 500 gained13.09 points or 0.67 percent, to 1,973.32. The Nasdaq Composite shot up 50.47 points or 1.14 percent, to 4,458.65.
Shares (Berlin: DI6.BE - news) of Netflix Inc (Xetra: NFC.DE - news) rose 7.4 percent to $473.10after Goldman Sachs (NYSE: GS-PB - news) raised its rating on the streaming videocompany's shares to "buy" from "neutral", according totheflyonthewall.com.
Twitter (Xetra: TWR.DE - news) shares jumped 2.6 percent to $42.05 on newsthat a former Goldman Sachs executive would become thecompany's new chief financial officer while current CFO MikeGupta will become senior vice president of strategicinvestments.
Shares of credit and debit card companies rose after ElviraNabiullina, the chairwoman of Russia's central bank, said Russiamay reduce pledges imposed on MasterCard and Visa if they findlocal processing partners. MasterCard shares climbed 2.8percent to $75.53.
Positive data from Asia helped buoy investors' confidence inthe strength of the global economy, including China's finalreading of the HSBC/Markit purchasing managers' index (PMI) forJune, which rose to 50.7 from May's 49.4.
Manufacturing in Japan, the world's third-biggest economy,also picked up in June, fueled by improving demand at home.Growth in the euro zone, however, faltered as Germany, theregion's top economy, slowed.
About 5.84 billion shares changed hands on U.S. exchanges,in line with last month's average of about 5.8 billion,according to data from BATS Global Markets.
Advancers outnumbered decliners on the New York StockExchange by a ratio of about 2 to 1, while on the Nasdaq, nearlythree stocks rose for every one that fell. (Editing by Bernadette Baum and Jan Paschal)
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