The U.S. stock market jumped on Monday as Congressional lawmakers suggested that a deal to avert the looming "fiscal cliff" appears to be near at hand. Throughout the day, the market continued to rise and closed out on the highs of the session as an optimistic tone prevailed. Some of the gains may also have been driven by fund managers who were looking to push stocks higher to close out their year on a high note.
The Dow Jones Industrial Average closed out 2012 with a gain of 166 points to 13,104. The widely watched blue-chip average traded in a range between 12,884 and 13,109. For the year, the Dow added 7.26 percent.
The S&P 500 jumped nearly 24 points, or 1.69 percent, on the last day of 2012 closing at just above 1,426. For the year, the S&P added a very respectable 13.41 percent.
The Nasdaq Composite was the biggest winner on the day, adding more than 59 points, or 2 percent, to finish above 3,000 at 3,019.51. For 2012, the Nasdaq closed up almost 16 percent after big gains for large-cap tech stocks such as Apple (AAPL) and Oracle (ORCL).
The U.S. dollar was all over the place versus major currencies on Monday. The euro was weak versus the greenback, falling 0.20 percent, but the British pound was strong with the GBP/USD rising 0.56 percent. The dollar did the best versus the Japanese yen on the session with the USD/JPY rising 0.73 percent. The other notable mover was the USD/CAD pair which fell 0.33 percent to $0.9930.
Crude oil benefited from increased risk appetite on the day. NYMEX crude futures added 1.04 percent to $91.74 while Brent contacts rose 0.44 percent to $111.11. Natural gas, however, lost more than 3 percent on Monday.
Precious metals were also higher on the session with gold added more than 1 percent to $1,673.40. Silver also notched a gain of better than one percent and continues to hold just above the $30.00 level.
In the agricultural complex, volatility for most products was limited with corn finishing up around 0.60 percent and most of the other grains recording small losses. Orange juice concentrate contracts trading on ICE fell more than seven percent, however, on the session.
Demand for U.S. Treasurys fell sharply on Monday as money flowed into riskier assets. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) plunged 1.73 percent to $121.18. Yields rose across the curve, with the long-end getting hit particularly hard. The 30-Year Bond yield climbed 8 basis points to 2.95 percent while the yield on the 10-Year Note rose 6 basis points to 1.76 percent. On the year, the yield on the 10-Year fell 12 basis points while the 30-Year Bond yield rose 6 basis points.
Volatility and Volume
The VIX got pancaked on Monday as fear left the market as investors sense that some kind of agreement about the fiscal cliff is near. The VIX plunged 20.55 percent on the day to just over 18.
Despite it being New Year's Eve, traders were very active on Monday on account of the tense headlines coming out of Washington D.C. Volume in the SPDR S&P 500 ETF (SPY) was the heaviest it has been in awhile with nearly 235 million SPY shares trading hands compared to a 3-month daily average of 137.6 million.
Among the day's big movers were Apple (AAPL) and Herbalife (HLF).
As the market surged throughout the afternoon, money flowed into Apple shares which have been falling in recent months. The stock climbed more than four percent which was enough to give the company a valuation of over $500 billion once again.
Herbalife shares jumped more than 12 percent on the session to $32.94. The stock has been extremely volatile ever since hedge fund manager Bill Ackman called the company a "pyramid scheme" and revealed that he is short over $1 billion worth of Herbalife stock. In recent days, HLF has been recouping some of the steep losses which came in the aftermath of Ackman's attack on the company.
Other big movers included Lexicon Pharmaceuticals (LXRX) which popped almost 16 percent and Alon USA Energy (ALJ) which rose more than 19 percent.
Shares of valuation advisory firm Duff & Phelps (DUF) added almost 20 percent on the last day of the year after buyout firm the Carlyle Group and others agreed to acquire the company for around $665.5 million.
By Scott Rubin