Traders work on the floor of the New York Stock Exchange on Jan. 2, 2013, as stocks rally.(Photo: Spencer Platt, Getty Images)
NEW YORK -- The "fiscal cliff" compromise, despite lingering
problems, sent the stock market shooting higher Wednesday, first trading
day of the new year.
The major U.S. stock indexes swelled at
least 2% before trimming some of those gains. The Dow Jones industrial
average briefly surged to its biggest gain in six months before giving
up some ground.
Stocks around the world also leapt higher. Major
indexes in Britain, France and Germany rose more than 2%. Markets in
Greece and Spain were up more than 3%. Stocks in Asia also zoomed
In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 10 rose.
Some investors cautioned that the euphoria can't last long.
market's big escalation, they said, was driven not so much because
investors love the budget deal that Republicans and Democrats hammered
out, but because they're grateful there was any deal at all.
people think that no deal would have been worse than a bad deal," said
Mark Lehmann, president of JMP Securities in San Francisco. He called
the current package "not too Draconian."
The bill passed Tuesday
night will prevent the "cliff" from taking hold. Still, it only
postpones rather than solves many of the budget issues haunting the U.S.
deal doesn't include any significant deficit-cutting agreement, meaning
the country still doesn't have a long-term game plan for how to rein in
spending. Big cuts to defense and domestic programs, which were slated
to kick in with the new year, are still overhanging the market but just
delayed for two months. And the U.S. is still set to bump up against its
borrowing limit, or "debt ceiling," in about two months.
"There's definitely another drama coming down the road," said Lehmann. "That's the March cliff."
worry that more political bickering could cause the U.S. to get its
debt rating downgraded by the ratings agencies. The stock market plunged
in August 2011 after Standard & Poor's cut the U.S. government's
Wednesday's performance gave no hint of the dark clouds on the horizon.
The Dow briefly surged as much as 273 points.
yield on the 10-year Treasury note rose sharply, to 1.84% from 1.75%,
as investors dumped safe harbor investments like U.S. government bonds
and plowed money into stocks. Prices for oil and key metals, including
gold, copper and platinum, were up.
Among stocks making big moves, Zipcar shot up 48%, or $4, to $12.24 after the company said it had agreed to sell itself to Avis. Avis rose $1.02 to $20.84, about 5%.
has a business model that's popular with drivers, allowing them to rent
cars for just a few hours at a time. The company has struggled to win
over investors, however, and its stock plunged nearly 39% in 2012. Avis
rose 84% in the same period.