New York - US stocks took off flying on the first trading day of the new year on Wednesday after Congress reached a last-minute deal to avert the fiscal cliff, avoiding forcing the economy back into recession.
The S&P 500 soared 2.5%, its best rise since December 20, 2011, as traders shrugged off the specter that a new deficit fight between Democrats and Republicans was just weeks away to go on a buying spree.
The Dow Jones Industrial Index closed up 308.41 points at 13,412.55.
The broad-based S&P 500 added 36.23 at 1,462.42, while the Nasdaq outperformed with a 92.75 point gain, to 3,112.26.
The surge, which saw a number of blue-chip companies racking up three percent-plus gains, wrapped up an extraordinary new year run on global bourses, all encouraged that Washington would avoid the growth-crunching tax hikes and spending cuts of the cliff.
"It may have come at the last minute, but US lawmakers finally managed to find some common ground by voting through a package of policies designed to avoid the immediate fiscal cliff," noted ETX Capital trader Joe Rundle.
Also helping was positive purchasing managers index data for manufacturing in China, India and the United States, while eurozone activity remained in contraction.
Among leading companies, AT&T rose 3.8%, Microsoft 3.4%, Apple 3.2%, and IBM 2.5%.
Auto-sharing service Zipcar roared 47.8% higher after car-rental giant Avis announcing plans to buy it in a deal valued at $500m. Avis rose 4.8%.
Boeing rose 2.3% after announcing an order from leasing company Aviation Capital Group for 60 of its new 737 MAX jetliners, a deal worth $6bn at current list prices.
Fresh food and fruit giant Dole plunged 13.4%, hit by a statement that its global banana business could suffer due to the huge impact that December's Typhoon Bopha had on the Philippine banana crop.
"The current estimated impact to the Asian banana industry is a loss of 30 million 13-kilo boxes, which is approximately 14 percent of the Asian banana industry on an annualized basis," the company said.
Another loser was bookseller Barnes & Noble, which late last month admitted its Nook e-reader sales over Christmas were disappointing.
Bond prices fell, driven by the news of the fiscal cliff deal. The 10-year yield rose to 1.84% from 1.76% on Monday, while the 30-year jumped to 3.05% from 2.95%. Bond prices and yields move inversely.