Stocks Swell on Deal to Avert 'Fiscal Cliff'; Dow Surges 308 Points

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"Wall Street will likely savor the resolution for the time being, but experience renewed investment agita before the quarter is out, offering better entry levels as the year progresses," said Sam Stovall, chief equity strategist at S&P Capital IQ.

Analysts at Cantor Fitzgerald noted that the markets seemed to be shrugging off the fact that the U.S. did in fact hit its debt ceiling late on Dec. 31, with no rating agencies having spoken out on U.S. debt following the event.

Markets were closed Tuesday for the New Year's Day holiday.

The Institute for Supply Management said Wednesday that the ISM Manufacturing Index rose to 50.7 in December from contraction territory at 49.5 in November. Economists expected an increase to 50.3 in December.

Paul Ashworth, U.S. economist at Capital Economics, said that the deal reached to avert most of the scheduled tax increases could provide a small boost to manufacturers in January, but "it is far from a certainty, particularly when the spending cuts that will hit government contractors hard have only been delayed for a couple of months."

The Census Bureau reported that construction spending fell 0.3% in November after rising by a downwardly revised 0.7% in October. Economists had predicted an increase of 0.6% for November.

Capital Economics economists noted that while the construction spending data points were disappointing, they shouldn't be cause for too much worry as construction spending numbers are generally a volatile series month to month.

Gold for February delivery surged $13 to settle at $1,688.80 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts closed up $1.30 at $93.12 a barrel.

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The benchmark 10-year Treasury plunged by 23/32 to push the yield up to 1.841%. The dollar was up 0.06%, according to the U.S. dollar index .

In corporate news, Avis (CAR) announced that it is acquiring Zipcar (ZIP) for about $500 million, or $12.25 a share in cash, a 49% premium over Zipcar's closing price on Dec. 31.

Zipcar shares surged 47.8%. Avis shares jumped 4.8%.

Live Nation Entertainment's (LYV) Irving Azoff plans to resign as chairman of the concert promoter and will sell 1.7 million Live Nation shares to Liberty Media (LMCA) . Live Nation shares tacked on 4.1% and Liberty shares were up 3.3%.

High seas and strong winds prevented crews from boarding a Royal Dutch Shell (RDS.A) drilling ship to check for any damage after the large vessel went aground off an uninhabited island in the Gulf of Alaska, The Associated Press reported. Shares added 0.41%.

Synergy Pharmaceuticals (SGYP) shares popped 18.1% after the biotech company announced that its treatment of chronic constipation met the primary and key secondary endpoints of a later phase clinical study.