By Jonathan Cheng Investors cheered a last-minute budget compromise in Congress, pushing technology and small-capitalization stocks higher amid a broad equity rally.
The Dow Jones Industrial Average shot up 242 points, or 1.9%, to 13346, in late Wednesday trading, for a second consecutive session of triple-digit gains. The blue-chip Dow had rallied 166 points, or 1.3%, on New Year's Eve, to close out a year of solid returns.
If the Dow finishes where it is trading now, it would mark the biggest one-day jump for the benchmark in four months.
The Standard & Poor's 500-stock index climbed 29 points, or 2%, to 1455 while the Nasdaq Composite jumped 79 points, or 2.6% to 3099.
The broad-based rally, which saw all 30 Dow components and all 10 sectors of the S&P 500 tack on gains, came after the House of Representatives passed legislation late Tuesday that prevented most impending tax increases and postponed spending cuts by two months, while raising taxes on the wealthiest 2% of Americans.
The budget deal also triggered a rally in small-capitalization and transportation stocks. The Russell 2000 small-cap index climbed 2.6% to trade above its record closing high, of 865.19, which it hit in April 2011.
The Dow Jones Transportation Average, an index of 20 railroad, airline and shipping companies that is seen by some investors as a forerunner for the Dow industrials, advanced 1.8% to its highest level since July 2011.
Leading the stock gains were technology, telecommunications and financial stocks. Hewlett-Packard rose 5.2% to lead the Dow components, after suffering the steepest fall among the 30 Dow stocks in 2012. Apple climbed 3.1%, adding to a 4.4% run-up on Monday, lifting the Nasdaq benchmark.
While investors were happy to celebrate the compromise, many also expressed disappointment over the reduced scope of the deal, which props open the door for further rancor in the coming months.
Some investors were already turning their focus to looming congressional fights over the budget, preprogrammed spending cuts and the debt ceiling, which limits the U.S. government's ability to borrow.
Moody's Investors Service said in a statement Wednesday afternoon that the budget deal passed by Congress "does not...provide a meaningful improvement in the government's debt ratios over the medium term," reminding investors of the risks still hovering over markets. Moody's, which has put its top-notch rating of the U.S. government on a negative outlook, said the negotiations would likely affect its next ratings action.
"It's good that they struck a deal, but there's a harder fight in the next six to eight weeks, and it's tough to imagine the market doesn't stay choppy until we get past the debt ceiling debate," said Richard England, portfolio manager for Atlanta Capital Management, which manages $14 billion in assets. "That doesn't mean the market has to go down in the interim, but maybe it doesn't go up much either."
Mr. England said that he was keeping his stock portfolio relatively neutral, meaning he wasn't taking any major bullish or bearish bets amid the continued political uncertainty.
European markets rallied sharply, with the Stoxx Europe 600 up 2% and on track for the highest close since February 2011, as the U.S. budget deal overshadowed some disappointing economic data. Among regional markets, Germany's DAX added 2.2% to a fresh five-year high and the U.K.'s FTSE 100 climbed 2.2% to an 18-month high.
The euro zone's manufacturing purchasing managers index slipped to 46.1 in December, indicating further contraction. Meanwhile, the U.K.'s manufacturing PMI rose to 51.4, which indicates expansion.
Asian markets also rallied sharply, with Australia's S&P ASX 200 running up 1.2% and Hong Kong's Hang Seng shooting up 2.9%, both to 19-month highs. Markets in Japan and mainland China were closed for a holiday.
On the U.S. economic calendar, the Institute for Supply Management's purchasing managers index for December registered at 50.7, better than expectations and November's reading of 49.5. Readings above 50 indicate expansion.
Separately, construction spending slipped 0.3% in November, bucking projections for a 0.7% monthly rise.
Crude-oil futures surged 1.4% to $93.12 a barrel, while gold futures ticked up 0.8% to $1,687.90 an ounce. Silver added 2.6% and copper, an industrial metal closely tied to global growth, climbed 2.3%.
The dollar rose against the yen and gained against the euro, after losing ground for much of the morning. Demand for Treasurys dropped, pushing the yield on the benchmark 10-year note up to 1.839%.
The CBOE Market Volatility Index, the "fear gauge" known as the VIX, fell sharply, to its lowest level in five weeks.
In stock movers, Zipcar soared 48% after the car-sharing-network operator agreed to be acquired by Avis Budget Group for about $500 million in cash. Avis rose 4.7%.
Macy's led a batch of retailers lower, falling 2.3% one day ahead of closely watched same-store sales figures for the month of December, due out Thursday. Consensus estimates for same-store sales data has been slipping in recent days. Abercrombie & Fitch stock lost 1.5%, Kohl's declined 2.4% and Target gave up 1%.
Magnum Hunter Resources gained 4% after the oil and gas company signed a joint operating agreement with privately held Eclipse Resources I, governing shale formations in Ohio.
Synergy Pharmaceuticals surged 16% after the company said later-stage study of its chronic constipation treatment met its primary and key secondary endpoints.
-Write to Jonathan Cheng at [email protected]
The Dow Jones Industrial Average shot up 242 points, or 1.9%, to 13346, in late Wednesday trading, for a second consecutive session of triple-digit gains. The blue-chip Dow had rallied 166 points, or 1.3%, on New Year's Eve, to close out a year of solid returns.
If the Dow finishes where it is trading now, it would mark the biggest one-day jump for the benchmark in four months.
The Standard & Poor's 500-stock index climbed 29 points, or 2%, to 1455 while the Nasdaq Composite jumped 79 points, or 2.6% to 3099.
The broad-based rally, which saw all 30 Dow components and all 10 sectors of the S&P 500 tack on gains, came after the House of Representatives passed legislation late Tuesday that prevented most impending tax increases and postponed spending cuts by two months, while raising taxes on the wealthiest 2% of Americans.
The budget deal also triggered a rally in small-capitalization and transportation stocks. The Russell 2000 small-cap index climbed 2.6% to trade above its record closing high, of 865.19, which it hit in April 2011.
The Dow Jones Transportation Average, an index of 20 railroad, airline and shipping companies that is seen by some investors as a forerunner for the Dow industrials, advanced 1.8% to its highest level since July 2011.
Leading the stock gains were technology, telecommunications and financial stocks. Hewlett-Packard rose 5.2% to lead the Dow components, after suffering the steepest fall among the 30 Dow stocks in 2012. Apple climbed 3.1%, adding to a 4.4% run-up on Monday, lifting the Nasdaq benchmark.
While investors were happy to celebrate the compromise, many also expressed disappointment over the reduced scope of the deal, which props open the door for further rancor in the coming months.
Some investors were already turning their focus to looming congressional fights over the budget, preprogrammed spending cuts and the debt ceiling, which limits the U.S. government's ability to borrow.
Moody's Investors Service said in a statement Wednesday afternoon that the budget deal passed by Congress "does not...provide a meaningful improvement in the government's debt ratios over the medium term," reminding investors of the risks still hovering over markets. Moody's, which has put its top-notch rating of the U.S. government on a negative outlook, said the negotiations would likely affect its next ratings action.
"It's good that they struck a deal, but there's a harder fight in the next six to eight weeks, and it's tough to imagine the market doesn't stay choppy until we get past the debt ceiling debate," said Richard England, portfolio manager for Atlanta Capital Management, which manages $14 billion in assets. "That doesn't mean the market has to go down in the interim, but maybe it doesn't go up much either."
Mr. England said that he was keeping his stock portfolio relatively neutral, meaning he wasn't taking any major bullish or bearish bets amid the continued political uncertainty.
European markets rallied sharply, with the Stoxx Europe 600 up 2% and on track for the highest close since February 2011, as the U.S. budget deal overshadowed some disappointing economic data. Among regional markets, Germany's DAX added 2.2% to a fresh five-year high and the U.K.'s FTSE 100 climbed 2.2% to an 18-month high.
The euro zone's manufacturing purchasing managers index slipped to 46.1 in December, indicating further contraction. Meanwhile, the U.K.'s manufacturing PMI rose to 51.4, which indicates expansion.
Asian markets also rallied sharply, with Australia's S&P ASX 200 running up 1.2% and Hong Kong's Hang Seng shooting up 2.9%, both to 19-month highs. Markets in Japan and mainland China were closed for a holiday.
On the U.S. economic calendar, the Institute for Supply Management's purchasing managers index for December registered at 50.7, better than expectations and November's reading of 49.5. Readings above 50 indicate expansion.
Separately, construction spending slipped 0.3% in November, bucking projections for a 0.7% monthly rise.
Crude-oil futures surged 1.4% to $93.12 a barrel, while gold futures ticked up 0.8% to $1,687.90 an ounce. Silver added 2.6% and copper, an industrial metal closely tied to global growth, climbed 2.3%.
The dollar rose against the yen and gained against the euro, after losing ground for much of the morning. Demand for Treasurys dropped, pushing the yield on the benchmark 10-year note up to 1.839%.
The CBOE Market Volatility Index, the "fear gauge" known as the VIX, fell sharply, to its lowest level in five weeks.
In stock movers, Zipcar soared 48% after the car-sharing-network operator agreed to be acquired by Avis Budget Group for about $500 million in cash. Avis rose 4.7%.
Macy's led a batch of retailers lower, falling 2.3% one day ahead of closely watched same-store sales figures for the month of December, due out Thursday. Consensus estimates for same-store sales data has been slipping in recent days. Abercrombie & Fitch stock lost 1.5%, Kohl's declined 2.4% and Target gave up 1%.
Magnum Hunter Resources gained 4% after the oil and gas company signed a joint operating agreement with privately held Eclipse Resources I, governing shale formations in Ohio.
Synergy Pharmaceuticals surged 16% after the company said later-stage study of its chronic constipation treatment met its primary and key secondary endpoints.
-Write to Jonathan Cheng at [email protected]