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Wall Street danced into 2013 amid a worldwide rally hours after bungling Washington politicians finally took steps to avert the fiscal cliff.
Stocks roared higher in their best performance in more than a year as investors exhaled — and hit the buy button — after a last-minute deal in Congress averted a likely recession-causing $600 million in automatic tax increases and budget cuts.
A 2.4 percent rise in the Dow Jones industrial average and a 2.5 percent rise in the S&P 500 Index extended a two-day rally after five straight down sessions accompanied fiscal cliff despair.
“After all of Washington’s tempest, it was a broad sign that maybe a bit of change is coming to Washington with some reaching across the aisle,” said senior economist Steve Blitz at ITG Investment Research.
In the wildest trading seen in more than a year, buyers pounced on nearly every stock — resulting in 10 gainers for every one that fell on the New York Stock Exchange.
In addition, investors sopped up oil, gold and other commodities.
Rallies also erupted across Europe and Asia, new signs of the world’s relief at seeing Washington’s “over-the-cliff” crisis turn out to be little more than dramatic bluster.
The cliff-averting deal raises the tax rate for individuals earning more than $400,000 but didn’t address much-needed spending cuts — something that didn’t escape Wall Street pros.
“We only got half a deal, but at least it was a deal — and that’s what rallied the markets.” Blitz said.
“The economy is dodging the iceberg, but is still adrift,” said Neal Soss, managing director and global head of economics at Credit Suisse.
“The year-long fiscal cliff odyssey produced no long-run budget fix, and leaves the door wide open for another debt ceiling fiasco in a matter of weeks,” he warned.
The greenback, however, took a pounding because its role as the world’s safest haven took a back seat to stocks.
Treasuries also weakened, as relieved investors began swapping into stocks and commodities such as oil, which climbed here 1.4 percent, to $93.12 a barrel.
Signs of higher interest rates ahead in 2013 surfaced as the benchmark 10-year US Treasury note yield jumped to 1.84 percent from 1.75 percent — the biggest in four months.
The S&P 500 rose 2.5 percent, to 1,462.42, while just 31 of its 500 stocks slipped. The Nasdaq climbed 3.1 percent, to 3,112.26, with gainers outnumbering losers more than 7-to-1.
Some economists fear that Washington’s gridlock might return in the next two months as Congress attempts to set borrowing limits for Uncle Sam.