Wall Street Extends Global Surge, Attention Shifts to Debt Talks

Bikram Pandey
02 Jan, 2013
New York City

Market indexes on Wall Street soared after lawmakers approved smaller tax increases and spending cuts and avoided the economy from sliding into a recession. Manufacturing expanded but construction activity fell. Markets in Europe and Asia soared at least 2%.

[R]1:40 PM New York – Market indexes on Wall Street soared after lawmakers approved smaller tax increases and spending cuts and avoided the economy from sliding into a recession. Manufacturing expanded but construction activity fell. Markets in Europe and Asia soared at least 2%.[/R]

U.S. stocks soared on the first day of trading and extended gains after Congressional leaders struck a last-minute deficit and budget agreement.

The so called fiscal cliff drama played out until the last minute as lawmakers haggled on the ideological biases and struck on respective party positions.

Several Republicans in the House of Representatives joined Democrats to approve a deal struck by the Senate earlier. The agreement will increase taxes on wealthiest 2% of Americans and postpones most of the tax increase and spending cuts by two months.

Investors shifted attention to mid-February deadline when lawmakers have to approve the debt ceiling.

European markets surged after U.S. approved smaller tax increase and spending cuts of $250 billion, less than the predetermined $600 billion.

The FTSE 100 index in London surged 2.2%, the DAX index gained 2.2% as well and the CAC 40 index in Paris soared 2.6%.

In Asian trading, the Hang Seng soared 2.9% and the Sensex index in Mumbai gained 0.7%. Markets in Tokyo are closed.

Manufacturing Expanded in December

U.S. manufacturing expanded a fraction in December and construction spending declined in November, the first decline in eight months.

The Institute for Supply Management said its index of manufacturing activity increased to 50.7 from 49.5. The reading above 50 indicates expansion and below 50 indicates contraction.

The index rebounded from the 40-month low in November but still below the 54.1 in January 2012.

Construction Activities Fall 0.3%

The Commerce Department said construction spending declined 0.3% to an annual rate of $866 billion.

Private spending on non-residential projects decreased 0.7%, the fourth monthly fall in six months.

Spending on private residential projects increased 0.4% and public sector construction spending increased 0.4%, state and local spending gained slightly by 0.1% and federal spending dropped 5.5%.

Stocks in Review

Avis Budget Group, Inc. ((CAR)) gained 3.1% or 68 cents to $20.46 after the rental car company agreed to acquire Zipcar for $12.25 a share in cash, 49% premium from closing price of December 31, represents total value of nearly $500 million. The transaction is expected to be completed in the spring of 2013.

The Avis reiterated fiscal 2012 revenues to increase 24% from a year ago to $7.3 billion and diluted earnings per share in the range of $2.35 to $2.45.

Zipcar surged 47.8% or $3.94 to $12.18.

Acadia Healthcare Company, Inc. ((ACHC)) rose 15 cents to $23.50 after the health care service provider completed the acquisitions of Behavioral Centers of America, LLC and AmiCare Behavioral Centers.

The company said proceeds from the recent sale of common stock was used to fund the BCA and AmiCare acquisitions.

ArcelorMittal SA ((MT)) increased 2.4% or 43 cents to $17.90 after the steel maker agreed to sell 15% stake in its ArcelorMittal Mines Canada to a consortium led by POSCO and China Steel Corporation to raise $1.1 billion to clear debt in sluggish demand.

The transaction is expected to close in two installments in the first and second quarters of 2013.