U.S. stocks rally as Congress avoids U.S. fiscal cliff, Dow gains 2.35%

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Investing.com - U.S. stock prices soared on Wednesday after Congress voted on tax and spending measures needed to avoid the fiscal cliff, steering the country away from market-roiling uncertainty and possible recession.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 2.35%, the S&P 500 index was up 2.54%, while the Nasdaq Composite index rose 3.07%.

The U.S. House of Representatives gave a final-hour vote on measures to avoid the fiscal cliff, preventing across-the-board tax hikes from taking effect at the same time as deep spending cuts with the arrival of 2013.

Stocks rallied on the news, as failure to avoid the fiscal cliff could have sent the U.S. economy sliding into a recession this year.

Still, some investors remained camped out in the safe-haven dollar, as lawmakers must meet again in the coming weeks to agree or not to lift the U.S. debt ceiling, likely by February.

Failure to lift the USD16.4 trillion government spending limit could force the Treasury Department to default.

Still, the relief rally stemming from the fiscal cliff resolution was stronger in equities markets than in others, as investors quickly focused on fundamentals, buying on sentiment that many U.S. companies are nicely priced by historical terms.

Elsewhere, manufacturing activity in the U.S. grew at a faster rate in December than analysts had predicted.

The Institute for Supply Management said its index of purchasing managers rose to 50.7 in December, up from 49.5 in November and beating expectations for a 50.3 reading.

Leading Dow Jones Industrial Average performers included Hewlett-Packard, up 5.26%, Caterpillar, up 4.31%, and AT&T, up 3.77%.

The Dow Jones Industrial Average's worst performers included UnitedHealth Group, up 0.55%, Merck, up 0.85%, and Johnson & Johnson, up 1.03%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 2.86%, France's CAC 40 rose 2.55%, while Germany's DAX 30 finished up 2.19%. Meanwhile, in the U.K. the FTSE 100 finished up 2.20%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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