This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Stocks Swell on Deal to Avert 'Fiscal Cliff'; Dow Surges 308 Points

NEW YORK (TheStreet) -- Major U.S. stock averages roared Wednesday as global risk appetite surged on the first trading day of the year after the House managed to pass the Senate's 11th-hour agreement on averting the "fiscal cliff."

The Dow Jones Industrial Average surged 308 points, or 2.4%, to 13,413. The blue-chip index had its biggest single-day gain since Nov. 19.

All 30 components in the Dow traded higher. The top percentage blue-chip gainers were Hewlett-Packard (HPQ), Caterpillar (CAT), AT&T (T), Coca-Cola (KO) and Intel (INTC).

Hewlett-Packard is evaluating the sale of businesses that don't meet goals more than a year after CEO Meg Whitman said she didn't plan to spin off the PC division, according to a Bloomberg report. Shares advanced 5.1% on Wednesday.

Intel's effort to develop an Internet-based TV service and associated hardware is taking longer than expected, people familiar with the company's plans told The Wall Street Journal, in part due to delays in reaching content agreements with media companies. Shares closed up 3.7%.

The S&P 500 gained 36 points, or 2.5%, to 1,462. The tech-heavy Nasdaq jumped 93 points, or 3.1%, to 3112.

Apple (AAPL) shares popped 3.2% as investors anticipate a big rally this year for the tech giant.

Facebook (FB) shares jumped 5.2%, lifted by positive analyst sentiment.

The vast majority of sectors in the broad market advanced, spearheaded by gains in basic materials, capital goods, technology and financials. Only the health care-sector declined.

Volumes were heavy in the session with 4.16 billion shares swapping on the New York Stock Exchange and 2.1 billion shares on the Nasdaq. Advancers were far outpacing decliners by a ratio of 9.7-to-1 on the Big Board and 6.6-to-1 on the Nasdaq.

David Bianco and Priya Hariani, market strategists at Deutsche Bank, said that although the "fiscal cliff" deal only covers taxes and pushes the spending issues off for a couple of months, they're "pleased" that it keeps the top dividend and capital-gains tax rates low and equal at 23.8%, and are raising their 12-month S&P 500 target to 1,575 from 1,500.

Tax hikes are still set to take place but to a more diluted degree and unemployment benefits will be extended until the end of the year. Planned spending cuts scheduled to kick in this month are to be postponed for two months.

"It sets up another showdown within weeks, which has the potential to be even more disruptive given the U.S. debt ceiling must be raised at the same time if technical default is to be avoided," said Gareth Berry, a currency strategist at UBS. "But, for now, the conditions seem right for a moderate celebratory rally in risk assets, however brief, and we would be reluctant to fight this just yet."

"Wall Street will likely savor the resolution for the time being, but experience renewed investment agita before the quarter is out, offering better entry levels as the year progresses," said Sam Stovall, chief equity strategist at S&P Capital IQ.

Analysts at Cantor Fitzgerald noted that the markets seemed to be shrugging off the fact that the U.S. did in fact hit its debt ceiling late on Dec. 31, with no rating agencies having spoken out on U.S. debt following the event.

Markets were closed Tuesday for the New Year's Day holiday.

The Institute for Supply Management said Wednesday that the ISM Manufacturing Index rose to 50.7 in December from contraction territory at 49.5 in November. Economists expected an increase to 50.3 in December.

Paul Ashworth, U.S. economist at Capital Economics, said that the deal reached to avert most of the scheduled tax increases could provide a small boost to manufacturers in January, but "it is far from a certainty, particularly when the spending cuts that will hit government contractors hard have only been delayed for a couple of months."

The Census Bureau reported that construction spending fell 0.3% in November after rising by a downwardly revised 0.7% in October. Economists had predicted an increase of 0.6% for November.

Capital Economics economists noted that while the construction spending data points were disappointing, they shouldn't be cause for too much worry as construction spending numbers are generally a volatile series month to month.

Gold for February delivery surged $13 to settle at $1,688.80 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts closed up $1.30 at $93.12 a barrel.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,120.79 +69.06 0.40%
S&P 500 1,982.85 +9.22 0.47%
NASDAQ 4,456.5210 +31.8170 0.72%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs