In this Monday, Dec. 31, 2012, photo, a trader works on the floor at the New York Stock Exchange in New York. World markets registered relief Wednesday Jan. 2, 2013 over the U.S. congressional vote to stop hundreds of billions of dollars in automatic tax increases and spending cuts that risked plunging the world's biggest economy into recession. (AP Photo/Seth Wenig)
NEW YORK — 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 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.
In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 10 rose. Technology stocks rose the most. U.S. government bond prices fell sharply as investors pulled money out of safe-harbor investments. And the VIX, an index that measures investors’ expectations of future market volatility, plunged more than 18 percent to 14.68, the lowest close since October.
The very last week of each year and the first two days of the new year usually average out to a gain for U.S. stocks. But this year stood out. From 2008 to 2012, the Dow rose an average of 93 points on the first trading day of the year, less than a third of Wednesday’s gain of 308.41. During that period the Dow fell on the first trading day of the year only once, in 2008.