Dow up 308 as tax deal cheers investors

The market opens the year higher for a record fifth straight time. Investors worldwide hail the fiscal cliff bill -- especially investors in dividend-paying stocks. Apple, US Steel and Facebook are among the top performers. Gold and oil move up.

By Charley Blaine Jan 2, 2013 3:31PM
© Image Source/PhotolibraryUpdated: 4:53 p.m. ET

Don't look now, but the stock market set a record on Wednesday. In the process of generating its biggest rally in more than a year, the major averages opened higher on the first day of the year for a record fifth year in a row.

The Dow Jones industrials ($INDU) closed up more than 300 points, and the major averages had their largest gains on an opening day of trading this century. The Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) also enjoyed record-setting days.

The catalyst is obvious: Markets around the world heaved a big sigh of relief that Congress agreed to a deal that would keep Bush-era tax cuts in place for all but the most affluent. The bill raises the top tax rate for the most affluent Americans.

The Dow soared 308 points to 13,413. The S&P 500 added 36 points to 1,462. And the Nasdaq climbed 93 points to 3,112. The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, gained 86 points to 2,746. The point gains for the Dow, S&P 500 and Nasdaq were their biggest since Nov. 30, 2011, when they rose 490, 52 and 105 points, respectively. The percentage gains -- 2.35%, 2.54% and 3.07%, respectively -- were the best since 2009.
There is a risk, however, that the rally may be short-lived. A more contentious fight between Democrats and Republicans in Congress is ahead over raising the nation's debt ceiling and over spending cuts required under the 2011 budget deal.

"House Republicans can be humiliated for only so long," Greg Valliere of the Potomac Research Group wrote clients on Wednesday morning. "They're itching for fights where they have leverage." And they potentially have lots of leverage over the debt ceiling and spending.
The stock market's gains come after it ended higher on the first session of the year for the fifth straight time and after Monday's big rally as the outlines of the deal, forged by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, began to take form.

One big reason for the rally was that tax rates on dividends were largely left alone.

If you're single earning $400,000 a year or more or married earning $450,000, you'll pay 20% on your dividend income. For everyone else, it's 15%. Stocks paying big dividends like AT&T (T), Verizon Communications (VZ) and Consolidated Edison (ED) jumped 2% or more as a result.

Still, the Dow, S&P 500 and Nasdaq still remain below their 2012 highs, set in September and early October. The S&P 500 is within 3 points of its post-crash high of 1,465.77, set Sept. 14.

The market had closed higher on four straight up opening days only twice: between 1973 and 1976 and between 2009 and 2012, according to Standard & Poor's Howard Silverblatt.

It is not uncommon, however, for the market to rise on the first trading day of the year. In fact, the market has moved higher on the first day of trading 10 times this century. Three of the four declines -- in 2000, 2001 and 2008 -- suggested difficult times were ahead.

All 30 Dow stocks were higher, led by Hewlett-Packard (HPQ), Caterpillar (CAT) and AT&T.

Energy stocks were the strongest sector of the S&P 500, where about 450 of its component stocks were higher. Also showing strength: semiconductors, steel, housing and airline stocks.

The S&P 500 leaders were U.S. Steel (X), Lam Research (LRCX) and LSI Logic (LSI). Also showing strength: MetLife (MET) and Viacom's Class B shares (VIAB).

Alexion Pharmaceuticals (ALXN) was the Nasdaq-100 leader, followed by Viacom, Regeneron Pharmaceuticals (REGN) and Wynn Resorts (WYNN). Facebook (FB), up $1.38  to $28, was higher on speculation its mobile advertising efforts will pay off.

Apple
(AAPL), which represents more than 17% of the market capitalization of the stocks in the index, was up $16.86 to $549.03. The shares are up 9.5% since hitting a near-term bottom of $501.23 on Dec. 17.

In addition, shares of Zipcar (ZIP), the car-sharing company, were up $3.94 to $12.18 after agreeing to sell out to Avis Budget Group (CAR) for $12.25 in cash per share, or about $500 million, a 49% increase from Monday's close. The downside of the deal: Zipcar went public in 2011 at $18 and jumped to as high as $31.25 on the first day of trading and never came close to hitting that price again. It bottomed at $5.90 on Nov. 7. 

European and Asian stocks also surged Wednesday, with stocks in Germany, the United Kingdom and France rising more than 2%. Hong Kong's Hang Seng Index jumped 655 points, or 2.9%, to 23,312.

The market rally pushed interest rates higher; the 10-year Treasury yield moved up to 1.832% from Monday's 1.756%.

Gold (-GC) settled up to $13 to $1,688.80 an ounce in New York. Crude oil (-CL) in New York settled at $93.12 a barrel, up $1.30. Brent crude in London was up $1.19 to $112.30.

There was OK news on manufacturing from the Institute for Supply Management. Residential construction spending also moved higher in November, the Commerce Department said, but construction spending overall fell for the first time since March because of a 5.5% decline in spending on federal construction projects.

But Chinese manufacturers enjoyed a strong end to the year with operating conditions improving at the fastest rate in 19 months, according to HSBC's latest Purchasing Managers' Index.

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117Comments
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Sold some S&P today, kept some.  Betting it will slip downwards for most of the year.  Might get more in the Fall.  Thoughts out there?
Jan 3, 2013 4:08AM
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Stock market starts 2013 with a bang but takes a dive, then  investors realize they've bamboozled. A false economy based on overprinting of fiat currency out of thin air propping up a highly over valued market thanks to The Fed Reserve and the Almighty Bernanke and his endless QE's.

 

China and other buyers of our debt have already been turning to gold and other investments. We are creating more faux currency and buying back our own debt because our creditors are losing faith and trust in it. This huge ponzi scheme by our failed leaders and The Fed Reserve will not last.

 

 

Jan 3, 2013 1:06AM
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Monetary Pyridine, Fiat banking, The Federal Reserve, Wall Street, all of the mentioned things are going to be the END of us ALL. Financially at least. My hope is we all try to help each other when it happens. You can't spend your way out of debt.( We should do what Iceland did. Fire our Government. Then tell the debtors to go to hell.) They have actually been sentencing the Banksters there? Sounds like a good start to me.
Jan 3, 2013 12:16AM
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Mooooooooooo, snort,snort, moooooooo !!
Jan 2, 2013 11:55PM
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I never understood the concept of Zipcar. The last time I loaned some one my car many years ago they wrapped it around a tree. The loss was mine. I wonder what Avis will do with it.
Jan 2, 2013 11:30PM
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Classic....Did you happen to catch my spelling class last night or maybe this morning ??

 

I usually don't bother to correct most, because I have my own....NBFD.

 

As long as I understand what they mean, it's okay...BUT,When it doesn't make sense...

I appreciate someone clearing it up....

BUT NOT WITH ANOTHER RIDDLE..kapish.

Jan 2, 2013 9:34PM
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CRAZY 8:Call me names but I`ve made a ton of money the last 4 years.Eat your heart out.
Jan 2, 2013 8:58PM
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But I like it when you call me honey
Jan 2, 2013 8:57PM
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I know more than you do and they were the first to have an National Health Care plan back in OTTO Von Bismark's time.

So Socialist we are far from.
Jan 2, 2013 8:48PM
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The bulls are running, some might even call it a stampede........right to the slaughterhouse.
Jan 2, 2013 8:47PM
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Marxist America ? What are you talking about?

We are not even close to European Socialism, heck not even close to Canada's Social system.

The Tea party is an example of how a minority group can take hostage the branches of government.

Remember this is how the Nazi Party in Germany came to power.
Jan 2, 2013 8:31PM
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payroll tax is going back to what it was in 2010 it was just temporary and it was passed by the very same president who is in power.

Just like the Bush tax cuts was supposed to be temporary but once the rich enjoyed that Holiday forget it.

And then people talk about deficits??? I really don't get it.

Hellooooo wake up in order to reduce the deficit we have to roll back those temporary cuts.
Jan 2, 2013 8:26PM
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What ever, next week some turd in Iran will fart and everything comes crashing down . Repeat weekly!
Jan 2, 2013 8:25PM
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This is proof that the conservative complainers of the agreement were wrong! they said it would kill jobs, but a rising stock market will p create jobs!

 

Jan 2, 2013 8:20PM
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Once people start realizing that they will have $100-$200 less in their paycheck every month, they will pull back from spending. 
Jan 2, 2013 8:19PM
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I've read some of the posts here and it looks like a mix of wanting more revenues to spend and not enough cuts.  The current occupant of the White House is a very progressive, marxist, social agenda proponent.  Oh, redistribution is his plan.  We (our national government) borrows nearly 1 / 2 of its current spending brewha.  This is simply unsustainable, even common sense liberals understand if it continues we will all suffer a fate far far worse than anything the US has ever seen.  It will surpass the suffering of the Great Depression.  I support sequestering and Congress doing nothing to raise the debt ceiling, it may seem bad, but putting it off will be far harsher.  I can hear the clacking of shoes in the halls of plenty (congress) running to get a straw.   What might the straw be for....why,.. to slurp up the swill of pork and debt. 

Jan 2, 2013 8:13PM
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As long as there are people making millions a year shuffling papers while others are making eight bucks an hour changing elderly people's poopy diapers, we will need redistribution of wealth.
Jan 2, 2013 7:55PM
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Can't wait until the Tea Party is ousted in 2014
Jan 2, 2013 7:30PM
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You act like deficits were created by Obama.

Ronald Reagan began what I call the modern deficit spending that we see today and Bush added on to that.

Considering that we had a surplus under Clinton years Bush will go down as the worst in regards to the budget.

Now let's address the current deficit problem.  It would be an impossibility to reduce the deficit without any revenue increase.  Obama lost the fight in 2011 because the NAZI GOP congress held the country hostage and used that leverage to force Obama not to raise taxes and cost us our credit rating.

Now in order to address the deficit we turn again to raising taxes and now a smarter Obama got some sort of deal not all but a deal to bring in more revenues.

Please let me know if you have any more questions.  I 'll be glad to educate you some more

Jan 2, 2013 7:29PM
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it went up monday before any deal came through it just happens to be higher today !!!! people better be carefull the rich are balloning the market again
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