Dow Gains 308 Points as Investors Applaud Fiscal-Cliff Solution

Nasdaq Composite (COMP) rallies more than three percent

by 1/2/2013 4:20:47 PM
Stocks quoted in this article:

"2013 is clearly off to a good start," exclaimed Schaeffer's Senior Equity Analyst Joe Bell, who added, "pretty much each and every sector across the board was in the green." A collective sigh of relief among fiscal-cliff watchers was expressed by a rush in buying demand that sent the Dow Jones Industrial Average (DJI) up more than 300 points by the close.

Continue reading for more on today's market, including:

  • Does Apple Inc. (NASDAQ:AAPL) have farther to fall? Senior Options Strategist Tony Venosa, CMT, details points for the bearish case.
  • Schaeffer's contributor Adam Warner shares an interesting volatility reference point to watch this year.
  • Reviewing the latest option plays on three of the Street's most active stocks.
plus...
  • The end to the fiscal cliff debates ... for now, a hedge in Bank of America (NYSE:BAC), and some wise words to start the year via our Tweet of the day.

The Dow Jones Industrial Average (DJI) traded solidly higher on the day, ending pennies away from its intraday peak with a gain of 308 points, or 2.4%. The index eased back above its 10-day moving average for its highest finish since Oct. 18. All 30 Dow names closed in the black, led by Hewlett-Packard (NYSE:HPQ), which gained 5.4%. At the back of the pack was UnitedHealth Group (NYSE:UNH), ending up 0.6%.

Also turning in an impressive show of strength was the S&P 500 Index (SPX), which gained 36 points, or 2.5%. The tech sector didn't disappoint, as the Nasdaq Composite (COMP) outperformed its index brethren, surging almost 93 points, or 3.1%.

The CBOE Market Volatility Index (VIX) continued its sharp descent, shedding 3.3 points, or 18.5%, to touch its lowest close since early October.

CLOSING SUMMARY – INDICES

CLOSING SUMMARY – NYSE AND NASDAQ

A Trader's Take:

"Today it was clearly all about the deal reached in Washington to avoid the dreaded fiscal cliff," remarked Bell. "While short-term concerns were squashed by Congress, fourth-quarter earnings are right around the corner and the debate and deadline for spending cuts will be fast approaching," he cautioned. "Many are evaluating just how effective this plan will be, but there is no argument that the initial market reaction was positive," Bell concluded.

3 Things to Know About Today's Market:

  • In highly dramatic fashion, the U.S. House of Representatives convened for an emergency holiday vote to sign off on a fiscal-cliff avoidance measure. The final version of the deal -- which stopped automatic tax hikes for most Americans but failed to address the debt ceiling -- was approved by the Senate and the White House during the wee hours of Tuesday morning. President Barack Obama advised that there is still work to be done, as spending cuts for domestic and military programs were only delayed for two months.
  • The Institute for Supply Management (ISM) manufacturing purchasing managers' index rose to 50.7 in December, exceeding economists' expectations for an expansion to 50.5. The measure came in at 49.5 in November, signifying contraction. Elsewhere, the Commerce Department reported a 0.3% decline in construction spending for November, marking the first pullback in the figure in eight months and disappointing economists, who projected a 0.7% gain.
  • Auto industry research firm Polk said new auto sales in the U.S. could top 15 million this year, which would be a 7% increase over 2012. The news helped send Ford Motor (NYSE:F) and General Motors (NYSE:GM) to new annual highs today, but the analysts did note that pre-recession sales levels in the 17 million neighborhood would not be likely anytime soon.

Plus ... while the participants in the Big Game remain anybody's guess, CBS Corporation (NYSE:CBS) has nearly sold all of its available ad time. As of this morning, the network only had two 30-second slots left to fill, despite the record price tag of up to $3.8 million per spot.

Today's Top Tweet:

"Don't listen to anyone (including me). Trade ur plan & do what works for u. If u don't have a plan, develop one that fits YOUR personality."
@jfahmy, (Joseph Fahmy), 12:11 p.m.

5 Stocks We Were Watching Today:

  1. Bank of America (NYSE:BAC) shareholders employed a collar strategy to hedge against an intermediate-term pullback.
  2. Facebook Inc (NASDAQ:FB) enjoyed another bit of good news from the brokerage front, as J.P. Morgan Securities increased its 12-month price target by $6.
  3. Ford Motor (NYSE:F) rallied to a new 17-month high on a positive sales outlook from the Street.
  4. Short-term Groupon (NASDAQ:GRPN) speculators targeted a move above $5 by week's end.
  5. Rare-earths name Molycorp (NYSE:MCP) caught the attention of bullish short-term traders.

Question of the Day:

Q: What were the worst-performing stocks in 2012?
A: This week's edition of Monday Morning Outlook also revealed the stocks posting the biggest losses in 2012, courtesy of Senior Quantitative Analyst Rocky White. All stocks included in the study were trading above $5 at the beginning of the year with average daily volume of at least 1 million shares. The goat of the market was NII Holdings (NASDAQ:NIHD), which lost 66%, according to Rocky's research through Dec. 28. Apollo Group (NASDAQ:APOL) ranked second-worst, with a drop of 62%. Other notable underperformers included Molycorp (NYSE:MCP) and Diamond Foods (NASDAQ:DMND), losing 61% and 58%, respectively.

For a look at today's options movers and commodities activity, head to page 2.

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