'Cliff' Deal Sends Stocks Up, But Problems Lurk
By CHRISTINA REXRODE
NEW YORK (AP) â¿¿ The "fiscal cliff" compromise, even with all its chaos, controversy and unresolved questions, was enough to ignite the stock market on Wednesday, the first trading day of the new year.
The Dow Jones industrial average careened more than 300 points higher, its biggest gain since December 2011. It's now just 5 percent below its record high close reached in October 2007. The Russell 2000, an index that tracks smaller companies, shot up to 873.42, the highest close in its history.
The reverie multiplied across the globe, with stock indexes throughout Europe and Asia leaping higher. A leading British index, the FTSE 100, closed above 6,000 for the first time since July 2011, at 6,027.37.In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 10 rose. All 30 stocks that make up the Dow rose, as did 94 percent of the stocks in the Standard & Poor's 500 index. U.S. government bond prices dipped sharply as investors pulled money out of safe-harbor investments. And the VIX, the "fear index" that measures investors' expectations of future market volatility, plunged more than 18 percent to 14.68, the lowest close since October. The very last week of each year and the first two days of the new year usually average out to a gain for U.S. stocks. But the size of this year's gains made it stand out. The Dow has risen on the first day of the trading year for each of the past four years, from 2009 to 2012. The average gain was 171 points â¿¿ sizable, but still much smaller than Wednesday's leap of 308.41. In the midst of the euphoria, many investors remained cautious. The deal that politicians hammered out merely postpones the country's budget reckoning, they said, rather than averting it.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV