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.
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.
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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The Market is like Obama, jumping like a Frog...and flapping his big lips...
Up today, Down tomorrow....
wait until we really hit the REAL FISCAL CLIFF.....and the DEBT CLIFF....
The U-Neons will not find that funny when their benefits will be abolished........
They think voting Obama back in the office is going to fix the problem. They will soon find out the truth. The rich worked hard to be where they are. Why should they have to pay more taxes for the federal government spending?
People use your head because a government supposes to create job and collect taxes the way it is suppose to be. A government should maintain their spending habits, a government need to produce enough goods and build a strong currency, not borrowing money from all corners of the earth and expect the few who are keeping the economy from going down to pay more taxes for their spending needs.
US is losing ground by the second because of these idiots on the white house. They called themselves rulers but they can barely think for themselves let alone running the country. No commonsense at all. It is so sad that their very own people put them in office. Only if Americans can stop watching Hollywood garbage and start watching some foreign news, then they will know what happen to their countries like France bubble head president who thinks he can tax the rich 75% out of 1 million euro. Most of the French thinks his idea is good and now they started to pay for it. Because the one who are rich are not about to give up their money to a government to spend any which way they want.
It is simple the rich will move their assets and businesses elsewhere, where taxes are free. They have a lot of money and they will be able to do whatever they wanted. Many successful French business owners are letting go their citizenship because it is not worth living in France any more.
The poor swear that the Democrats are helping them, when the rich decided to denounce their citizenship and move overseas will see how good the Democrats are. They keep calling the Republicans the party of NO, they don’t make these stupid decisions because they know that it doesn’t work for other country, they are observing the failures every day. Unlike The Democrats who knows exactly where they are taking the country and ignore the failure that is about to come and people are so blind they can’t see what is coming to the US. Raising the debt ceiling and tax the less than 2% rich that are keeping people like me employ to pay for borrowed money instead of creating jobs and stop spending. Not that very clever. Pitiful people are, they think people like me who wrote this post failed to except that the GOP lost the election. Unfortunately I am not neither, I never vote for anyone of them because they are all brainless, clueless with no Wisdom, I only have commonsense to see what is about to come.
Don`t be surprised if the market is up 20% this year.The bears will always be bearish
and miss out on the gains.Valuations are reasonable.Great days are here.
Not sure why anyone would buy stocks. The market is rigged and once obamas handlers have things they way they want it the stock market will crash. Our stock market has been propped up. The fall is coming and so is the civil war. Obama wants to take away are rights and the only ones who will let him are the city dwellers. They will go down without a fight. But the flyover states will succeed because we know how to fight and win. And since most of the military comes from the flyover states you will see desertion in the ranks. THe only hope this world has is for God to intervene.
Here we go....... Obama is continuing to destroy America and the American spirit. He has made middle class income the "new-evil-rich" and soon, the high side to hate will be anyone with anything.
His wish will be that big government is the default for everything and everyone. Looks like he's gonna get his way.
Pray for us all.
Heard it said last week... "best to invest in hand baskets..."
Those 300 Dow points won't help America one bit. Making bigger wealthier platforms that won't and don't hire people is going to bite us really hard really soon. And then there's the war that follows.
21 million people employed by federal and statel goverrnents.
63 million people living on government assistance.
109 million people employed by the private sector.
Do the math, 109 million people cant continue to support 84 million people. Our ecomomy will crash soon and this bill will do nothing to stop it.
Hmmm let's see we are putting about $1.8 trillion new debt on the Federal Goverment's tab every year into the foreseeable future.
The only thing that will stop the adding of about $2 trillion a year to the national debt will be when we cross over and start to add $3 trillion to the national debt.
The debt crisis in Europe and Japan look very very small when compared to the debt crisis in America.
So the tax increase is going to add what about $50 billion to the tax revenue a year
that is a joke it will not even keep up with inflated government debt next year.
Pretty much 1 to 3 years is all we have left in the US before our economy totally collapses and it will collapse soon and very quickly.
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