The first stock market session of 2013 began with a positive reaction to a new U.S. tax law that ended concern about a recession triggered by budget gridlock.
Major market indexes rose sharply on pent-up optimism after Congress passed the deal on taxes Tuesday and sent it to President Barack Obama to be signed into law.
Technically, the deal was a day late and it postpones a debate about spending cuts. But the fear of the default budget, which the new tax code eliminates, has been quelled.
The tax bill leaves federal tax rates intact for income up to $400,000 for individuals and $450,000 for families, circumventing concern that a large segment of the country will have less money to spend in 2013.
In early afternoon trading, the Dow Jones industrial average added 1.65 percent or 216.43 points to 13,320.57.
The Nasdaq gained 2.35 percent or 70.89 points to 3,090.40.
The Standard and Poor's 500 added 1.74 percent, 24.75 points, to 1,450.94.
The 10-year treasury note was off 22/32 to yield 1.837 percent.
The euro fell to $1.3164 from Monday's $1.32. The dollar rose to 87.14 yen from 86.71 yen.
In London, the FTSE 100 index gained 2.2 percent, 129.56 points, to 56,027.37.
Markets in Japan were closed.
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