NEW YORK The "fiscal cliff" compromise, even with all its chaos, controversy and unresolved questions, was enough to send the stock market shooting higher Wednesday, the first trading day of the new year.
All the major U.S. stock indexes swelled more than 2 percent in early trading and were still up significantly in the afternoon. The Dow Jones industrial average briefly surged to its biggest gain in six months.
The reverie multiplied across the globe, with stocks throughout Europe and Asia leaping higher.
In the U.S., the rally was extraordinarily broad. For every stock that fell on the New York Stock Exchange, roughly 9 rose. Technology and bank stocks rose the most. U.S. government bond prices fell as investors pulled money out of safe-harbor investments. Zipcar (ZIP) soared nearly 50 percent after agreeing to be bought by Avis (CAR).
But for all the euphoria, many investors cautioned that it can't last long. The deal that politicians hammered out merely postpones the country's budget reckoning, they said, rather than averting it.
"Washington negotiations remind me of the Beach Boys song, `We'll have fun, fun, fun 'til her daddy takes the T-Bird away," Jack Ablin, chief investment officer of BMO Private Bank in Chicago, wrote in a note to clients.
"Nothing got solved," added T. Doug Dale, chief investment officer for Security Ballew Wealth Management in Jackson, Miss.
According to them and others, the markets were celebrating Wednesday not because investors love the budget deal that was cobbled together, but because they were grateful there was any deal at all.
"Most people think that no deal would have been worse than a bad deal," said Mark Lehmann, president of JMP Securities in San Francisco. He called the current package "not too Draconian."
The House passed the budget bill late Tuesday night, a contentious exercise because many Republicans had wanted a deal that did more to cut government spending. The Senate had already approved the bill.
The late-night haggling was a product of lawmakers wanting to avert a sweeping set of government spending cuts and tax increases that kicked in Jan. 1 in the absence of a budget deal, a scenario that came to be known on Wall Street and Washington as the fiscal cliff, because of the threat it would pose to the fragile U.S. economic recovery.
The bill passed Tuesday night ended the stalemate for now, but it leaves many questions unanswered.
The deal doesn't include any significant deficit-cutting agreement, meaning the country still doesn't have a long-term plan or even a philosophical agreement for how to rein in spending. Big cuts to defense and domestic programs, which were slated to kick in with the new year, weren't worked out but instead were just delayed for two months. And the U.S. is still bumping up against its borrowing limit, or "debt ceiling."
"There's definitely another drama coming down the road," said Lehmann. "That's the March cliff."
The political bickering that's almost certain to persist could have another unwelcome effect: It could influence the ratings agencies to downgrade their ratings of the U.S. When that happened before, when Standard & Poor's cut its rating on the U.S. government in August 2011, the stock market plunged.
Even so, Wednesday's performance gave no hint of the dark clouds on the horizon.
The Dow briefly surged as much as 273 points in early trading. At mid-afternoon, it was up 219 points, or 1.7 percent, to 13,323.
The Standard & Poor's 500 was up 24, or 1.7 percent, to 1,450. The Nasdaq composite was up 68, or 2.3 percent, to 3,088.
The yield on the 10-year Treasury note rose sharply, to 1.83 percent from 1.75 percent. Prices for oil and metals including gold, copper and platinum, were up.
The gains persisted despite small reminders that there are still serious problems punctuating the world economy, like middling growth for the U.S. economy and the still-unsolved European debt crisis. The government reported that U.S. builders spent less on construction projects in November, the first decline in eight months. And the president of debt-wracked Cyprus said he'd refuse to sell government-owned companies, a provision that the country's bailout deal says it must at least consider.
Among stocks making big moves, Zipcar shot up 48 percent, or $4, to $12.24 after the company saidto Avis. Avis rose $1.02 to $20.84, about 5 percent.
Marriott rose more than 4 percent, up $1.69 to $38.96, after SunTrust analysts upgraded the stock to "buy." Headphone maker Skullcandy dropped 13 percent, losing $1.02 to $6.77, after Jefferies analysts downgraded it to "underperform" from "buy."