Stocks soar after 'fiscal cliff' deal is forged
BY Staff and Wire Reports
Thursday, January 03, 2013
1/03/13 at 8:33 AM
The "fiscal cliff" compromise, even with all its chaos, controversy and unresolved questions, was enough to ignite the stock market on Wednesday, the first trading day of the new year.
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 873.42, 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, at 6,027.37.
In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 10 rose. All 30 stocks that make up the Dow rose, as did 94 percent of the stocks in the Standard & Poor's 500 index.
A Tulsa-area money manager said that while Wednesday's rally isn't predictive, 2013 is shaping up to be a positive year for the stock market.
"Things are improving." said Brian Smith, a founding partner of CastleRock Financial Advisors in Collinsville. "Obviously, the fiscal cliff isn't exactly done. We've got the debt ceiling to deal with and spending cuts, so that will translate itself into market volatility.
"I think market volatility will be even higher in the early part of this year, just because of all these unresolved issues. But at the end of the day, it's not unreasonable to think that we'll see a moderate increase in the value of U.S. companies."
Tom Warburton, principal of Warburton Capital Management in Tulsa, refrained from attempting to figure out what sectors might perform best in 2013.
"Last year, the financial sector was the strongest sector in the Standard & Poor's 500, and who would have believed it with all the problems the banks were having a year ago," he said.
"Rather than trying to identify what sector will do well, we believe, and history bears this out, that small companies grow faster than big ones, and value stocks tend to outperform growth stocks."
U.S. government bond prices fell sharply Wednesday as investors pulled money out of safe-harbor investments. And the VIX, the "fear index" that measures investors' expectations of future market volatility, plunged more than 18 percent to 14.68, the lowest close since October.
According to many market watchers, investors were celebrating not because they love the budget deal that was cobbled together in Washington, but because they were grateful there was any deal at all.
"Most people think that no deal would have been worse than a bad deal," said Mark Lehmann, president of JMP Securities in San Francisco.
"There's definitely another drama coming down the road," Lehmann said. "That's the March cliff."
Even so, Wednesday's performance gave no hint of the dark clouds on the horizon.
The Dow enjoyed big gains throughout the day, up by more than 200 points within minutes of the opening bell. It swelled even bigger in the final half hour of trading, and closed up 2.4 percent to 13,412.55.
The S&P 500 jumped 36.23, or 2.5 percent, to 1,462.42. The Nasdaq rose 92.75, or 3.1 percent, to 3,112.26.
The yield on the 10-year Treasury note rose sharply, to 1.84 percent from 1.75 percent. Prices for oil and key metals were up. The price of copper, which can be a gauge of how investors feel about manufacturing, rose 2.3 percent. The Dow Jones transportation index rose to its highest point since July 2011.
The gains persisted despite small reminders that there are still serious problems punctuating the world economy, like middling growth in the U.S. and the still- unsolved European debt crisis. The government reported that U.S. builders spent less on construction projects in November, the first decline in eight months.
Stocks of local interest off to a hot start in 2013*
*Percentage gain for first day of trading.
- Syntroleum 16.5%
- Orchids Paper 6.2%
- Southwest Bancorp 7.6%
- Willbros Group 6.0%
- Halcon Resources 5.9%
- Mid-Con Energy 5.6%
- Whirlpool 5.3%
- Magellan Midstream 4.4%
- ADDvantage Tech 4.4%
- Phillips 66 4.1%
- Alliance Resource 4.1%
Source: Associated Press
Original Print Headline: Stocks soar
The story was compiled from reports by World Staff Writer Laurie Winslow and The Associated Press.
A trader gestures while working with colleagues at the New York Stock Exchange on Wednesday. Investors were in a buying mood after a deal on spending and taxes was struck in Washington. Shares of all 30 companies that make up the Dow Jones industrial average rose, as did 94 percent of the stocks in the Standard & Poor's 500 index. SCOTT EELLS / Bloomberg
Traders interact Wednesday while working on the floor of the New York Stock Exchange. SCOTT EELLS / Bloomberg