Stocks soar on budget deal, but problems lurk
NEW YORK — The fiscal cliff compromise, even with all its chaos, controversy and unresolved questions, was enough to ignite the stock market Wednesday, the first trading day of the new year.
First-day recap
The year’s opening-day stock market session gave no hint of the dark clouds many experts see on the horizon.
The Dow Jones industrial average was up by more than 200 within minutes of the opening bell. It swelled higher in the final half hour and closed up 2.4%, or 308.41, to 13,412.55.
The S&P 500 jumped 36.23, or 2.5%, to 1,462.42.
The Nasdaq rose 92.75, or 3.1%, to 3,112.26.
The yield on the 10-year Treasury note rose sharply, to 1.84% from 1.75%. Prices for oil and key metals were up. Copper, which can be a gauge of how investors feel about manufacturing, rose 2.3%.
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 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.
In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 10 rose. Technology stocks rose the most.
U.S. government bond prices fell sharply as investors pulled money out of safe-harbor investments. And the VIX, an index that measures investors’ expectations of future market volatility, plunged more than 18 percent to 14.68, the lowest close since October.
The last week of each year and the first two days of the new year usually average out to a gain for stocks, but this year stood out. From 2008 to 2012, the Dow rose an average of 93 points on the first trading day of the year, less than a third of Wednesday’s gain of 308.41.
Despite 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.
“Washington negotiations remind me of the Beach Boys song, ‘We’ll have fun, fun, fun ‘til her daddy takes the T-Bird away,” Jack Ablin, chief investment officer of BMO Private Bank, wrote in a note to clients.
“Nothing got solved,” added T. Doug Dale, chief investment officer for Security Ballew Wealth Management.
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