Futures Surge After Congress Passes Fiscal Legislation

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Wall Street was set to kick off the year in rally mode after Congress passed legislation that dodges many of the effects of the fiscal cliff after marathon New Year’s negotiations.

Today's Markets

As of 8:12 a.m. ET, Dow Jones Industrial Average futures surged 192 points to 13219, S&P 500 futures soared 25.3 points to 1445 and Nasdaq 100 futures rallied 52.3 points to 2708.

After months of political sparring on Capitol Hill, lawmakers finally passed a budget bill Tuesday. The move came after essentially 24-straight hours of wrangling in both chambers of Congress as the U.S. technically, if not briefly, slipped over the fiscal cliff. The deal that is expected to be signed into law by President Barack Obama extends tax cuts on single filers earning less than $400,00 a year and joint filers making less than $450,000. It also delays sequestration -- the painful automatic spending cuts that associated the fiscal cliff -- for two months.

Global markets cheered the news, with markets in Asia, Australia and Europe tacking on big gains in their first day of trading for the new year. Many economically-sensitive commodities roared higher as well.

Market participants were broadly relieved that the deal was passed, averting measures that could have dealt a painful blow to the world's biggest economy. Still, they struck a very cautious tone. Among the reasons for concern were the fact that the bill simply delayed the sequestration and failed to address the debt ceiling.

The U.S. has technically already hit the debt limit, forcing the Treasury Department to take "extraordinary measures" to give Congress headroom until about February. Last time the country pushed the upper bounds of the debt limit, it roiled the markets and cost the U.S. its pristine credit rating with Standard & Poor's.

"Considering there are so many headwinds facing the economy, including the debt ceiling negotiation in 60 days, the smart money knows the bullish sentiment will be short-lived.  The lesson for investors here is 'buyer beware,'" Todd Schoenberger, managing partner at LandColt Capital wrote in an e-mail.

Indeed, according to an analysis by Barclays, fiscal consolidation is likely to hit U.S. gross domestic product by 1.5% this year.

Also of interest on the day will be a report from the Institute from Supply Management. The ISM PMI gauge is forecast to show the U.S. manufacturing sector have flipped back into expansion mode last month after contracting in November. The economic calendar heats up later in the week ending with the monthly jobs report from the Labor Department.

Commodities rallied. The benchmark crude oil contract jumped $1.45, or 1.6%, to $93.28 a barrel. Wholesale New York Harbor gasoline gained 1.3% to $2.798 a gallon. In metals, gold advanced $12.30, or 0.75%, to $1,688 a troy ounce.

Foreign Markets

The Euro Stoxx 50 soared 2.8% to 2708, the English FTSE 100 rallied 2.3% to 6035 and the German DAX jumped 2.3% to 7783.

In Asia, the Chinese Hang Seng surged 2.9% to 23312. The Tokyo Stock Exchange was closed for a holiday.