Stock markets around the world ended the first trading day of 2013 with big gains, after investors welcomed a deal between President Obama and Congressional Republicans that ended, at least temporarily, an impasse over fiscal policy that had threatened chaos in the new year.
The benchmark Standard & Poor’s 500 index finished Wednesday up 2.5 percent. The technology-heavy Nasdaq composite index was up even more strongly, rising 3.1 percent. The Dow Jones industrial average rose 2.4 percent, or about 308 points.
The major indexes ended the day within striking distance of the highs they reached before the election.
The drama over the fiscal impasse ended when a sufficient number of Republicans in the House joined Democrats to back a deal the Senate had reached earlier. The deal modestly raises income taxes on the highest-earning Americans, ends payroll tax cuts and creates permanent tax cuts for others.
“You’ve just removed a huge worry from the market,” said Jonathan Lewis, the chief investment officer at Samson Capital Advisors.
Congress signed off on the deal late Tuesday night and it immediately sent stocks soaring first in Asia and then in Europe. Leading indexes rose 2.6 percent in France, 2.2 percent in Germany and 2.9 percent in Hong Kong. Markets in Japan and mainland China were closed for holidays.
In the United States, share prices experienced most of their increases in the first 30 minutes of the day and then plateaued for most of the rest of the day. In the bond market, investors sold off the longer-dated Treasuries that have been used as safe havens in recent years, pushing up the yield on the benchmark 10-year bond to 1.839 percent.
Many market strategists were already shifting their attention to the political sticking points that were not handled in this week’s agreement. Congress decided to defer for two months $110 billion of government budget cuts that were supposed to begin on Tuesday. Those cuts will have to be dealt with around the same time the government hits the so-called debt ceiling, beyond which it may not be able to borrow more money in the bond markets.
“There’s a recognition that this isn’t the end of the game,” said Jack Malvey, the chief market strategist at BNY Mellon.
In economic reports, the Institute for Supply Management said manufacturing in the United States expanded slightly in December. Its manufacturing activity index rose to 50.7 points in December, up from 49.5 in November.
In Europe, manufacturing activity remained in the doldrums. Surveys of purchasing managers by Markit Economics showed euro zone factories ended 2012 in poor shape, with both production and new orders declining in December. German factories posted declines in both output and new orders, according to the Markit data, while the Spanish manufacturing shrank a 20th consecutive month, with both the decline and the pace of job cuts accelerating.
This article has been revised to reflect the following correction:
Correction: January 2, 2013
An earlier version of this article misstated the surname of the chief investment officer at Samson Capital Advisors. He is Jonathan Lewis, not Jonathan Samson.
Stocks Jump 2.5% on Fiscal Deal
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Stocks Jump 2.5% on Fiscal Deal
