NEW YORK (MarketWatch) � U.S. stocks surged on Wednesday, with the Dow industrials notching their largest first-session-of-the-year-point rise ever, as Wall Street welcomed an 11th-hour deal to avoid steep spending cuts and tax increases and pondered deficit moves still ahead.
�The next focus will certainly be what happens in the next two months in terms of addressing spending and the effect of whatever we do on GDP growth rates,� Art Hogan, a market strategist at Lazard Capital Markets LLC, said of the impact of reduced government spending on the economy.
The measure approved by the House of Representatives just after 11 p.m. Tuesday undid tax hikes for all but one to two percent of U.S. households, with the bipartisan vote ending a lengthy standoff over how to avoid more than $600 billion in tax hikes and spending cuts viewed as likely to push the economy back into recession.
Yet the deal was not the grand bargain on cutting the nation�s red ink that lawmakers intended when they came up with tax-and-spending deadlines during the past few years.
Click to Play Obama praises fiscal-cliff dealPresident Barack Obama said he would sign the bill sent to him by Congress to avert the U.S. fiscal cliff. Watch Obama's full statement, in which he praises the late-night deal. Photo: Getty Images.
The measure bypassed much of the immediate trauma poised by the fiscal cliff and marked only one piece towards cutting the federal deficit, with a February battle looming over increasing the $16.4 trillion debt ceiling.
�We can celebrate the fact that we avoided catastrophe, but we�ll certainly focus on the making of spending cuts to get the rest of the fiscal cliff averted. Does that mean we ignore economic data and the M&A going on? Probably,� Hogan added of upcoming economic reports that include the nonfarm payrolls report for December due on Friday. Read: What�s the chance the relief rally will last?
�As we head into the next couple of weeks, we�ll get to figure out if we can make spending cuts with a scalpel or a sledge hammer,� said Hogan. Separate drama over deficit spending awaits.
The Dow Jones Industrial Average DJIA �rose 308.41 points, or 2.4%, at 13,412.55, with Hewlett-Packard Co. HPQ �and Caterpillar Inc. CAT �leading gains that included all of its 30 components. Read about Wednesday�s biggest stock movers.
The S&P 500 index SPX �climbed 36.23 points, or 2.5%, to 1,462.42, with telecommunications the best performing of its 10 major industry sectors, all of which advanced.
Wednesday�s session also marked the first time the S&P 500 opened five years in a row with a gain, with Howard Silverblatt, senior index analyst at S&P Indices noting that �the market moves in the same direction as its opening day 50% of the time.�
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United States Steel Corp. X �climbed 8.6% after Credit Suisse upgraded it to a buy rating.
Zipcar Inc. ZIP � jumped 48% after Avis Budget Group Inc. CAR �said it would acquire the company.
The Nasdaq Composite COMP �added 92.75 points, or 3.1%, to 3,112.26. Shares of iPhone maker Apple Inc. AAPL �rose 3.2%. Read: Apple sentiment improves with new year.
For every stock that fell more than 10 gained on the New York Stock Exchange, where 859 million shares traded.
Composite volume neared 4.2 billion.
Equities remained in party mode after the Commerce Department reported U.S. construction spending fell 0.3% in November. Separately, the Institute for Supply Management said its gauge of manufacturing activity expanded in December, to 50.7% from 49.5% the month before.
As equities rallied U.S. Treasury prices fell, with the yield on the 10-year note 10_YEAR �used in determining mortgage rates and other consumer loans rising to 1.84%.
As the market kicks off the new year with a rally, Mark Hulbert has evaluated the significance of January for stock investors. Read his column here on how different January is from other months.
Hulbert also has another column looking at why the smallest-cap stocks tend to be favored in January. Read that column here.
And for investors wondering whether it�s best to trade or not to trade, here�s a good analysis by Michael Kahn. Read: Don�t be afraid to trade.
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