* Compromise approved by Congress prompts stocks' rally
* Zipcar soars after $500 million offer to buy from Avis
* Bank shares rise as settlement nears
* Dow up 1.75 pct, S&P 500 up 1.86 pct, Nasdaq up 2.46 pct
By Chuck Mikolajczak
NEW YORK, Jan 2 U.S. stocks began the new year
with a broad rally on Wednesday, sparked by a last-minute deal
in Washington to avert the "fiscal cliff" of tax hikes and
spending cuts that threatened to derail the economy.
In 2013's first trading session, the S&P 500 was on target
for its best percentage gain since Nov. 19 and highest close
since Oct. 19.
The Dow Jones industrial average gained 229.64
points, or 1.75 percent, to 13,333.78. The Standard & Poor's 500
Index rose 26.53 points, or 1.86 percent, to 1,452.72.
The Nasdaq Composite Index jumped 74.26 points, or 2.46
percent, to 3,093.77.
U.S. markets were closed on Tuesday for New Year's Day.
Nine stocks rose for every one falling on the New York Stock
Exchange and all 10 of the S&P 500 industry sector indexes
gained at least 1 percent. The S&P financial index was
up 2.2 percent.
The S&P Information Technology index gained 2.1
percent, including Hewlett-Packard, which climbed nearly
5 percent to $14.95. HP's gain followed a miserable 2012 when
the stock fell nearly 45 percent.
Congress passed a bill to prevent huge tax hikes and delay
spending cuts that would have pushed the world's largest economy
off a "fiscal cliff" and possibly into recession.
The vote avoided steep income-tax increases for a majority
of Americans but failed to resolve a major showdown over cutting
the budget deficit, leaving investors and businesses with only
limited clarity about the outlook for the economy. Spending cuts
of $109 billion in military and domestic programs were
temporarily delayed, and another fight over raising the U.S.
debt limit also looms.
"We got through the fiscal cliff. The next big thing, and
probably more contentious thing, is negotiating the debt ceiling
and possibly entitlement reform in early 2013," said Jim
Russell, senior equity strategist for U.S. Bank Wealth
Management in Cincinnati.
Hard choices about budget cuts and the critical need to
raise the debt ceiling will confront Congress about the same
time in two months "so the fur will be flying," Russell said.
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.
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 percent to $11.95 and
Citigroup Inc gained 3.7 percent to $41.03. The KBW bank
index rose 2.4 percent and the S&P financial sector
climbed 2.2 percent.
Shares of Zipcar Inc surged 48.2 percent to $12.21
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 advanced 4.8 percent to
Shares of Apple rose 2.5 percent to $545.56,
helping to lift the S&P technology index up 2.3 percent
following a report that the most valuable tech company has
started testing a new iPhone and a new version of its iOS
Economic data showed U.S. manufacturing ended 2012 on an
upswing despite fears about the fiscal cliff, but construction
spending fell in November for the first time in eight months.