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U.S stocks rallied, giving the Standard & Poor’s 500 Index its biggest gain in more than a year, as lawmakers passed a bill averting spending cuts and tax increases threatening a recovery in the world’s  biggest economy. All 10 groups in S&P 500 (SPX) rose at least 1.8 percent and the 30 stocks in the Dow Jones Industrial Average rallied. The S&P 500 jumped 2.5 percent to 1,462.42 at 4 p.m. in New York. The benchmark index is up 4.3 percent over two days, the most since November 2011. The Dow climbed 308.41 points, or 2.4 percent, to 13,412.55 today. The Nasdaq Composite Index soared 3.1 percent to 3,112.26.

The House of Representatives passed a bill just after 11 p.m. in Washington yesterday by a vote of 257-167, undoing income tax increases for more than 99 percent of households. The S&P 500 surged 1.7 percent on Dec. 31, the biggest rally on the final day of a year since 1974, as Republican and Democratic lawmakers made last-minute concessions to finalize the deal. The bipartisan vote broke a yearlong impasse over how to prevent more than $600 billion in tax increases and spending cuts that could lead the economy back into recession. President Barack Obama said he will sign the bill into law.

Households making less than $450,000 per year would be spared an income tax rate increase under the agreement. The wealthy would see a rise in their top rate, to 39.6 percent from 35 percent. The top tax rates on capital gains and dividends would go up to 23.8 percent, from 15 percent last year. For an individual with $10,000 invested in the S&P 500, payouts would fall to $167.64 a year from $187. An investor who sells the stock at a $5,000 profit would face capital gains obligations of about $1,190 compared with $750.

Manufacturing in the U.S. expanded in December. The Institute for Supply Management’s U.S. factory index rose to 50.7 in December from 49.5 a month earlier, the Tempe, Arizona- based group said today. Economists in a Bloomberg survey projected a reading of 50.5 for December, according to the median of 71 forecasts. The dividing line between expansion and contraction is 50. Spending on U.S. construction projects unexpectedly dropped in November, restrained by declines in non-residential building and public works, a separate report showed.  

Investors bought shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index (CYC) and Dow Jones Transportation Average to their highest levels since July 2011. The Morgan Stanley gauge, which tracks 30 U.S. companies, added 2.9 percent, while the Transportation Average, which includes companies like FedEx Corp. and Union Pacific Corp., jumped 2.4 percent.  Financial companies rallied 2.9 percent. Bank of America Corp. (BAC), the second-biggest U.S. bank by assets, rose 3.6 percent to $12.03. Citigroup Inc. (C) added 4.3 percent to $41.25.  Technology companies climbed 3.2 percent. Apple, the world’s most valuable company, jumped 3.2 percent to $549.03. Facebook, the company that runs the largest social-networking website, advanced 5.2 percent to $28.

Blackstone Group LP’s Byron Wien, whose prediction for the U.S. stock market in 2012 proved accurate, said the S&P 500 will fall below 1,300 this year and European stocks will decline 10 percent.  Gold will climb to $1,900 an ounce and financial stocks will reverse their gains from last year, Wien, chairman of Blackstone’s advisory services unit, said in his annual “10 Surprises” list published since 1986. The Shanghai Composite Index will rally 20 percent in 2013, he said. His current forecast for the S&P 500 implies an 8.9 percent drop from last year’s closing level.  “A profit margin squeeze and limited revenue growth cause 2013 earnings for the S&P 500 to decline below $100, disappointing investors,” Wien wrote in an e-mailed statement today. “The structural problems of Europe remain largely unresolved and the mild recession that began there in 2012 continues.”

The 79-year-old former Morgan Stanley senior strategist correctly forecast the U.S. stock market a year ago when he said the S&P 500 would exceed 1,400. It closed 2012 at 1,426, rallying 13 percent. Wien also predicted rallies of 15 percent or more in equities in China, India and Brazil in 2012. While India’s Sensex Index gained 26 percent, Brazil’s Bovespa climbed 7.4 percent and the Shanghai Composite advanced 3.2 percent.           [Bloomberg]

Stocks on Bursa Malaysia closed lower yesterday on profit-taking activities after recording an all-time high on Monday. Index futures opened higher this morning at 1,686.50 as the Dow Jones Industrial Average surged more than 300 points higher on the first day of trading in 2013. Today’s Support and Resistance for January contract is located around 1,685 and 1,695 respectively.