Stocks jump, finish at multiyear highs

Updated: 8 p.m. ET

When the stock market finished 2011, many analysts said 2012 would be more of the same: a bad start and strong finish.

In fact, 2012 started with big gains for the major indexes, but the market peaked in mid-September and early October and stumbled into the close.

Until Monday, when hopes for a deal on the fiscal cliff set off the biggest one-day rally for stocks since mid-November.

As important, the Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) enjoyed their their best year-end closes in five years. The finish for the Nasdaq Composite Index ($COMPX) was its best since 1999.

The 2012 gains came despite worries about the fiscal cliff. In addition, the market had to weather fears about economic health in Europe and China and a toxic political culture at home.

Congress was still grappling Monday with how to minimize the effects of the fiscal cliff -- some $600 billion in tax increases and spending cuts set to take effect Jan. 1. But it appeared the guts of a tax bill were coming together. The deal would raise taxes on households that make more than $450,000 a year and individuals who make more than $400,000.
The Dow closed up 166 points to 13,104. It was the Dow's first year-end close above 13,000 since 2007 and best one-day gain since Nov. 23.

The S&P 500 climbed 24 points to 1,426, its first year-end close above 1,400 since 2007. The Nasdaq jumped 59 points to 3,015, its first close above 3,000 since 1999. The gains for the S&P 500 and Nasdaq were their best since Nov. 19.

The Dow ended the year up 7.3%, an improvement over the 5.5% gain it saw in 2011. The S&P 500 gained 13.4% for the year, compared with no gain at all a year ago. The Nasdaq's 16% gain was double its 7.9% gain in 2011.

If there was a downside to the finish, it was that the major averages closed 3% or so  below their peaks for the year.

The Dow finished 3.7% below its high of the year, 13,610, set on Oct. 5. The S&P 500 peaked at 1,466 on Sept. 14. The Nasdaq's closing high was 3,184 on Sept. 14.

What the plans entails
The emerging deal would also permanently patch the Alternative Minimum Tax, raise the estate tax rates for high-value properties, extend unemployment benefits for a year, extend several middle-class tax cuts for five years and add a temporary fix to Medicare reimbursement rates, Politico.com said.

It was not clear if the Senate would vote on the bill today. The House wasn't expected to vote on a plan until Tuesday at the earliest. So, technically it means the nation will fall over the fiscal cliff.

There was unhappiness on Democratic and Republicans about the bill. Liberals said the President gave up too much. It wasn't clear if Republicans in the house will vote for the bill.

The deal that's coming together does not deal with federal spending. That will come later and may well set up a bigger battle over the national debt limit.

What's ahead in 2013
If you want to guess what will happen with markets in 2013 -- and remember, most predictions are wrong -- the odds favor a volatile first half of the year and a stronger second half.

It's not clear if the market can move much higher. Stock-price gains of 10% are hard to justify if the economy is growing at 2% to 3% a year, Bill Gross, chief investment officer at PIMCO, told CNBC today. 

But some pieces of the economy are finally joining the economic recovery, especially housing and automobiles.

At the same time, for now, the European appears to be stable, although deeply stressed. China's economy is showing signs of strength and is a reason why commodity prices, particularly copper and iron prices, have been rising of late.

Apple's big role in the market
The gains for the S&P 500 and the Nasdaq were influenced by one stock: Apple (AAPL), which closed up $22.58 to $532.17. It gained 31.4% in 2012, despite falling about 24% after peaking in mid-September.

Apple represents roughly 17% of the market capitalization of the Nasdaq-100 Index ($NDX), which was up 16% for the year. It's about 4% of the market cap of the S&P 500.

The Nasdaq-100 is down nearly 6% since the end of September. Apple is down 21%. So, Apple represents more than half of the index's decline. 

The S&P 500 was down 2.7% between Sept. 28 and Friday. Without Apple's sell-off, the index would have been down just 1.7%.

• The market's biggest winners, losers of 2012

Apple aside, the market gained strength from some of its weakest performers in 2011: banks and homebuilders. The Philadelphia Bank Index ($BKX) was up 29.2% this year.

Bank of America (BAC) was the best performer in that index as well as the Dow and S&P 500, rising nearly 107% to $11.50. The banking giant nearly collapsed in the 2008 financial crisis but seems to be getting problems from its disastrous Countrywide Financial acquisition under some control. The company is starting to generate "buy" ratings from analysts as opposed to "sell."

American International Group (AIG), which had to be propped up by the government in the financial crisis, paid off all its government aid, is making money and is up 52% on the year. Sounds good, but AIG is still down 97% from its all-time highs in 2004.

The Philadelphia Housing Sector Index ($HGX) is 65% higher for the year, tops among 44 indexes that I track. The reason: A housing recovery seems to have begun. Demand and prices are rising in many markets. While many would-be buyers are renting, they will start to consider homeownership if they see a stable national and local economies and job markets.

The laggard group has been the NYSE Arca Gold Bugs Index ($HUI), down 11.3%.

Gold (-GC) itself, however, finished up $19.90 to $1,675.80 an ounce. For the year, the metal finished 7% higher. Silver (-SI) settled the day at $30.227 an ounce, up 25.2 cents and up 8.3% for the year. 

Light sweet crude oil (-CL) in New York was up $1.02 to $91.82 a barrel.  Brent crude was up 51 cents to $111.13 a barrel. Light sweet crude was down 7% for the year. Brent crude may finish up 3.5% when trading ends at 6 p.m. ET on Monday.

More on Money Now

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• 2012 was a big year for beer
• Fiscal cliff could crush minimum wage hikes

Markets for the year
			2012			2011			Dec. chg.			YTD chg.
Dow Industrials			13,104.14			12,217.56			0.60%			7.26%
S&P 500			1,426.19			1,257.60			0.71%			13.41%
Nasdaq			3,019.51			2,960.31			2.00%			15.91%
Nasdaq-100			2,660.93			2,277.83			-0.63%			16.82%
Russell 2000			849.35			740.92			3.34%			14.63%
Crude oil			$91.82			$98.83			3.37%			-7.09%
(per barrel)
U.S. Dollar Index			79.87			80.52			-0.37%			-0.81%
10-yr. Treasury yield			1.756%			1.871%			8.90%			-6.15%
Gold			$1,675.80			$1,566.80			-2.15%			6.96%
(per troy ounce)
Dow Jones Transports			5,306.77			5,019.69			3.67%			5.72%
Dow Jones Utilities			453.09			464.68			-0.23%			-2.49%
Phila. Semiconductors			384.06			364.44			2.59%			5.38%
Phila. Bank Index			51.28			39.38			5.60%			30.22%
NYSE Arca Oil Index			1,241.84			1,229.10			2.08%			1.04%
Philadelphia Housing  Index			171.29			102.93			2.73%			66.41%
Nikkei 225 Index (Japan)			10,395.18			8,455.35			10.05%			22.94%
Xetre Dax Index (Ger,)			7,612.39			5,898.35			2.79%			29.06%
FTSE 100 Index (UK)			5,897.81			5,572.28			0.53%			5.84%