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Despite widespread criticism that Washington simply once again kicked the can down the road, investors nevertheless celebrated the fiscal cliff deal that the Senate and House approved yesterday. With only small rises on tax rates for dividends and capital gains and permanent relief from the Alternative Minimum Tax, the Dow Jones Industrials (INDEX: ^DJI ) skyrocketed by 308 points, its biggest gain since late 2011.
Every stock in the Dow 30 climbed, with broad-based gains ranging from technology and industrials to telecoms and even consumer goods. Hewlett-Packard led the Dow with a more-than-5% advance, but it's clear that stocks across the market benefited from the cliff resolution, as 10 stocks in all gained 3% or more.
Outside the Dow, stocks made some truly huge moves. Long-suffering rare-earth play Molycorp (NYSE: MCP ) gained 10% on speculation that industrial companies that use rare-earth metals in their manufacturing processes could seek to buy the company just to lock in dependable supplies. With prices having fallen so far, however, the short-term need is no longer as compelling as it was in past years.
U.S. Steel (NYSE: X ) rose almost 9% on a generally good day for heavy industrial stocks. The stock got an upgrade from Credit Suisse, and with conditions starting to look more favorable in China after last year's growth slowdown, the entire steel industry appears poised for a recovery.
iRobot (Nasdaq: IRBT ) rose 11%, perhaps on hopes that an alternative to sequestration could boost its chances of retaining important Defense Department business. With its dual exposure to defense and consumers, however, iRobot has two growth avenues to pursue, with diversification being especially handy given the current budget situation.
Finally, Zipcar (Nasdaq: ZIP ) finished up 48% after receiving a buyout bid from rental car company Avis Budget. At certain points during the day, the stock even traded above the $12.25-per-share buyout price, suggesting that investors wanted a competing bid. Yet with other players in the industry having already made big acquisitions, it seems unlikely that a bidding war will start for Zipcar.