Market Review By TraderXP:
The yen and the dollar rose against the euro as investors turned their attention from American politicians can agree raising the limit national debt.
U.S. debt ceiling "is going to potentially start to get a little more attention to market sentiment in the coming weeks," said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp (WBC) "This is likely to be more positive U.S. Dollar History" "yen could also benefit," he said.
Market News
Wall Street begins a new year with a bang after the "cliff" deal
Stocks started the new year with their best day of the year on Wednesday, due to relief at the last minute deal in Washington to avoid a "financial cliff" of tax increases and spending cuts that threatened to derail growth.
In 2013, the first trading session, S & P 500 reached its biggest one-day gain since December 20, 2011, by pressing the benchmark index to its highest close since Sept. 14.
Concerns about Washington's ability to bypass thecliff drove S & P 500 down for five sessions before signs that the resolution was sent about the benchmark index higher on the final trading session of 2012.
CBOE Volatility Index, or VIX, a favorite gauge of Wall Street investor anxiety, fell 18.5 percent to 14.68 at the close. VIX fell 35.4 percent in the last two sessions, the biggest two-day percentage drop in the history of the index.
Index Dow Jones Industrial Average jumped 308.41 points, or 2.35 percent, to 13,412.55 at the close. 500 Index Standard & Poor gained 36.23 points, or 2.54 percent, to end at 1,462.42. The Nasdaq Composite Index rose 92.75 points, or 3.07 percent, to end at 3,112.26.
U.S. markets were closed on Tuesday new Year'sDay.
In general, the dynamics of the market reflects the strong rally, with 10stocks growth for each that fell on the New York Stock Exchange. All 10 S & P 500 index of the industrial sector received less than 1 percent. S & P financial index soared 2.9 percent.
S & P Information Technology increased by 3.2 percent, including Hewlett-Packard, which rose 5.4 percent to $ 15.02. HP gain followed a miserable 2012, when stocks fell nearly 45 percent, as one of the worst performers S & P 500 in 2012.
On Tuesday, Congress passed a bill to prevent huge tax increases and spending cuts delay, which would have pushed the world's largest economy from a "financial cliff", and possibly a recession.
Results of the vote to avoid steep income tax increases for most Americans, but failed to address major showdown over cutting the budget deficit, leaving investors and enterprises with limited clarity on the economic outlook. Spending cuts of $ 109 billion in military and national programs have been temporarily suspended, and another struggle for raising the U.S. debt limit and weaving machines.
"We went through a financial cliff. Next big thing, and probably more controversial things, talks about the debt ceiling and possibly the rights reform in early 2013," said Jim Russell, a senior strategist for the American Capital Asset Management Bank in Cincinnati .
Hard choices about budget cuts and an urgent need to raise the debt ceiling will oppose the Congress at about the same time in twomonths ", so the fur will fly," said Russell.
U.S. stocks finished 2012 with S & P 500 by 13.4 percent for the year, as investors largely ignored the concerns about the financial cliff. For the year, Dow gained 7.3 percent and the Nasdaq jumped 15.9 percent.
Bank shares rose after news that U.S. regulators close to achieving another multi-billion agreement with major banks to resolve allegations that they illegally cut corners when foreclosure offenders borrowers.
Bank of America Corp rose 3.7 percent to $ 12.03 and Citigroup Inc gained 4.3 percent to $ 41.25. KBW bank index. BKX rose 3.2 percent.
Zipcar Inc shares rose 47.8 percent to $ 12.18after Avis Budget Group Inc said it will buy Zipcar about $ 500 million in cash to compete with larger rivals Hertz and Avis Enterprise Holdings Inc. advanced 4.8 percent to $ 20 , 77.
Shares of Apple rose 3.2 percent to $ 549.03, helping to lift the S & P information technology index up 3.2 percent after areport, that the most valuable tech company began testing the new iPhone and the new version of its software IOS.
Economic data Institute for Supply Management showed U.S. manufacturing finished 2012 on the upswing, despite concerns over the financial cliff, but the Commerce Department reported that construction spending fell in November for the first time in eight months.
Volume was heavy, with about 7.8 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, well above the 6.42 billion daily average the2012. Reuters.com
Currencies
Dollar falls against higher-yielding currencies, the yen sinks
The dollar slipped against higher-yielding currencies such as the Australian dollar, while the yen sold on Wednesday after U.S. lawmakers forged last-minute deal to avoid huge tax increases and spending cuts, stimulating demand for riskier investments.
Investors tend to sell the dollar and the yen as highly liquid currency when risk appetite is strong.
But the dollar and yen loss may be temporary, because potentially contentious negotiations ahead of the cost constraints and the debt ceiling.
U.S. Treasuries fell on the financial agreement, as investors felt comfortable leaving the safety of government bonds, while stocks posted sharp growth.
The dollar, however, recovered against the euro as some traders booked profits after driving the single currency to two weekhigh just below $ 1.33.
Despite the passage of the bill to avoid "financial cliff" removed some uncertainty soon, it will not end political showdown on the budget. Battle for sequestration, as the automatic spending cuts, as we know, the U.S. debt ceiling will come to a head in February.
"While the U.S. is not a financial cliff diving, it's still going down a steep hill financial ski that will take significant bite out of economic growth," said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.
"The sense of closure that investors feel today may soon dissipated, as the focus shifts to the negotiations forward."
Profitable and growth-related currencies rallied. The Australian dollar rose 0.9 percent to $ 1.0497 after reaching a two-week high. New Zealand's dollar rose 0.7 percent to $ 0.8338, while the Canadian dollar rallied against the U.S. dollar, which fell 0.7 percent to C $ 0,9858.
The euro fell 0.2 percent to $ 1.3185. It earlier hit a high of $ 1.3299, according to Reuters, the highest in two weeks, and not far from 8-1/2-month high on December 19.
"It looks like someone forgot to tell the euro, that he should go up after the end of the agreement the rock," said Matthew Lifson, senior analyst and trader at Cambridge Mercantile Group, in Princeton, New Jersey.
Euro gained almost 10 percent since the end of July, when the European Central Bank President Mario Draghi said that the ECB will do "whatever it takes" to save the euro.
Strategists, however, said that the euro could see renewed pressure if concerns about the weak euro zone economy again.
Eurozone factories sank deeper into recession in December, data showed on Wednesday. Markit index in the euro zone manufacturing purchasing managers (PMI) fell to 46.1 in November to 46.2. This was below the 50 mark that divides growth from decline since August 2011.
In contrast, data on Wednesday showed the U.S. manufacturing industry ended 2012 on the rise, despite fears over the financial cliff, with factories return to growth in December after declining in the previous month, according to the Institute for Supply Management.
"All the noise (for the financial rocks) at the end of the year in the U.S. is over," said Lifson Cambridge. "It may be time to focus on the economy, and now it seems that the European countries are in worse shape than the U.S. economy. Advantage, U.S. dollars? It just may be."
On Friday, the ISM services data and closely watched U.S. non-farm payrolls data for December will be released.
The euro rose 1.3 percent to 115.99 yen Reutersdata, the strongest since July 2011, and was the last one to 0.5 per cent in the 115.07 yen. Option barriers were identified at 116 yen.
The dollar rose 0.7 percent to 87.26 yen, touching 87.33 yen earlier, the highest since the end of July 2010.
The yen also come under pressure in recent weeks on expectations that the new Japanese government will push the Bank of Japan in a stronger monetary easing.
Speculators betting against the yen hit a peak of more than five years in December, but have eased in the past two weeks. Some strategists are warning of a potential rebound in the yen after the next meeting of the Bank of Japan on 21-22 January.
Options on the market, one-month dollar / yen implied volatility touched 8-1/2 month high of 9.2 on Wednesday, according to Thomson Reuters, as the demand to hedge against further weakening of the yen is gaining momentum. It was last at 8.65 m, in some way from mid-December low 7.1. Reuters.com
