* Tuesday vote to avert "fiscal cliff" prompts stocks' rally
* Zipcar soars on news of Avis Budget acquisition
* Bank shares rise as settlement nears
* Dow up 1.7 pct, S&P 500 up 1.7 pct, Nasdaq up 2.2 pct
By Gabriel Debenedetti
NEW YORK, Jan 2 (Reuters) - U.S. stocks jumped on the year's
first day of trading, after Washington lawmakers cut a
last-minute deal to avert automatic tax hikes that threatened to
stunt economic growth.
With the gains, the S&P 500 was on target for its highest
close since Oct. 19.
The rally was broad-based, with nine stocks rising for every
one falling on the New York Stock Exchange. All 10 S&P 500
industry sector indexes rose at least 1 percent, led by the S&P
financial index, up 2.2 percent.
The S&P Information Technology index gained 2.1
percent. Among the strongest names in the sector was
Hewlett-Packard, which climbed nearly 5 percent to
$14.95. HP's gain followed a miserable 2012, when the stock fell
nearly 45 percent.
On New Year's Day, while the U.S. stock market was closed,
Congress passed a bill to raise taxes on wealthy individuals and
families, and preserve certain benefits, while avoiding
immediate austerity measures. The combination of mandatory tax
hikes and reduced federal spending, which had been set to go
into effect on Jan. 1, had been known as the "fiscal cliff."
" We had three choices: We were going to be off the cliff, we
were going to be on the cliff, or we were going to avoid the
cliff, and we avoided it," said Brian Battle, director of
trading at Performance Trust Capital Partners in Chicago.
"There's a relief rally, some progress because we raised
revenue, but I think it's going to be short-lived because the
relief rally today was created by politics, and the next cliff
is going to be created by politics."
The vote avoided income-tax hikes for all U.S. households,
but failed to resolve other political budget showdowns. Spending
cuts of $109 billion in military and domestic programs were
delayed for just two months, as another fight over the U.S. debt
limit also looms then.
The market's surge was due to "the concrete news as opposed
to a lack of specific news" that was common during the
negotiations, said Stephen Carl, head of U.S. equity trading at
The Williams Capital Group in New York.
U.S. stocks ended 2012 with the S&P 500 up 13.4 percent for
the year, as investors largely shrugged off worries about the
fiscal cliff. For the year, the Dow gained 7.3 percent and the
Nasdaq jumped 15.9 percent.
The Dow Jones industrial average gained 223.60
points, or 1.71 percent, to 13,327.74. The Standard & Poor's 500
Index advanced 24.61 points, or 1.73 percent, to
1,450.80. The Nasdaq Composite Index climbed 66.87
points, or 2.21 percent, at 3,086.38.
Bank shares rose following news that U.S. regulators are
close to securing another multibillion-dollar settlement with
the largest banks to resolve allegations that they unlawfully
cut corners when foreclosing on delinquent borrowers.
Bank of America Corp rose 3.4 percent to $11.99 and
Wells Fargo shares added 2 percent to $34.87. JPMorgan
Chase & Co shares rose 1.5 percent to $44.34.
Shares of Zipcar Inc jumped 48.4 percent to $12.23
after Avis Budget Group Inc said it would buy Zipcar for
about $500 million in cash to compete with larger rivals Hertz
and Enterprise Holdings Inc. Avis rose 4.5 percent to
Shares of Apple rose 2.4 percent to $545, boosting
technology stocks, following a report that the most valuable
tech company has started testing a new iPhone and a new version
of its iOS software. Apple stocks struggled in the final weeks
of 2012 before a rally to end the year.
U.S. manufacturing expanded slightly in December after an
unexpected November contraction, an Institute for Supply
Management report showed on Wednesday.
A Commerce Department report showed U.S. construction
spending fell in November for the first time in eight months, as
an extended bout of weakness in the business sector outweighed
modest growth in outlays on residential projects.
The stock market's reaction to both reports was muted.