If Ralph Kramden of The Honeymooners were around today, he would proudly have proclaimed that he knocked the S&P 500 (^GSPC 0.99%) right in the kisser and sent it straight to the moon. This may be a bit of an exaggeration, but there was no denying the overwhelming bullishness that swept the U.S. markets today following an agreement (finally!) regarding the fiscal cliff.
The new mix of tax hikes -- including a 2% payroll tax hike for many Americans, a slight boost in long-term capital gains taxes and dividend taxes to 20% from 15%, and higher tax rates for individuals making more than $400,000 and families making more than $450,000 -- should help funnel some badly needed revenue to the U.S. government, but it does little to close a very wide spending gap that will need to be tackled within the next few weeks.
The S&P soared 36.23 points (2.54%) to finish the day at 1,462.42.
Steelmaker U.S. Steel (X +0.00%) was the biggest gainer within the S&P 500, rising nearly 9%, after Credit Suisse upped its rating on the company to "outperform" from "neutral," and boosted its price target to $30. Credit Suisse cited the potential for a rebound in Chinese demand, as well as attractive fundamentals in the steel industry coupled with a resolution to the fiscal cliff as reasons to upgrade U.S. Steel. Although I agree with much of Credit Suisse's assessment, I can't say I agree with choosing U.S. Steel over its peers.
Analyst coverage was also the reason semiconductor equipment maker Lam Research (LRCX 5.05%) advanced more than 7%. Research firm DA Davidson started Lam with a "buy" rating and a $56 price target, claiming its recent acquisition of Novellus for $3.1 billion will expand its product portfolio and provide ample synergistic opportunities over the next few years. With a CAPScall of outperform on Lam myself, I couldn't agree more.
Despite the big advance, there were still quite a few losers to be found in the energy sector with CONSOL Energy (CNX +0.23%) and Cabot Oil & Gas (COG +0.00%) dipping 3% and 1%, respectively. According to a report from Bloomberg, warmer-than-expected weather is chilling hopes for strong demand and higher prices for natural gas drillers and coal miners. Natural gas futures fell 3.5% today, bucking a very large move higher in most commodities and accounting for why oil and gas drillers underperformed the market.
