Rally to wall street. Awaiting president obamas signature tonight is an agreement not to raise taxes on most americans. Even though hard decisions on Government Spending cuts were put off, the deal over tax rates ushered in a 308 point rally for the Dow Jones Industrial average. But as sylvia hall reports, the new session of Congress Beginning tomorrow faces some Big Decisions very soon. Reporter as americans return to work from the holidays, they might breathe a little easier knowing the fiscal cliff isnt happening. But the deal on the president s te. In fact, it sets the stage for a bitter First Quarter fight. The bill does add some certainty to this years tax rates, by permanently extending bushera tax cuts for people making less than 400,000 per year and couples making less than 450,000. It also staves off the sequester that package of sharp federal spending cuts for two months. But lets look at what the deal doesnt do. It doesnt take the sequester off the table completely, and it doesnt raise the debt limit. Theyll both have to be resolved in february and march. It just, to me seems like were going to have another acrimonious debate just like we had on the fiscal cliff this time, and just like we had on the debt limit in 2011. Reporter just last night the president warned congress that he wont negotiate on the debt limit. The one thing that i think hopefully in the new year we can focus on, is putting a package like this together with a little bit less drama, a little less, and not scare the heck out of folks quite as much. Reporter but, with the sequester and other big spending issues like medicare on the table, striking a deal this year wont be easy. This is the best opportunity that were going to have to save our nation and do those things that we have to put in play. Reporter but theres not much hope for a sweeping deal this year. My suspicion is that we will you know, kick the can down the road on whatever we do in february or march, and it may be for a year, it may be for two years, but well be coming back to deal with issues like this in the nearterm. Reporter the investment market isnt putting much pressure on lawmakers to forge a longterm solution for the nations fiscal troubles, and some fear that could mean a real fix is still very far away. The good news is that when we go through these political crises, the markets dont punish us. But thats also the bad news, because politicians are never really put under the pressure to come to a deal on these big critical longerterm fiscal issues. Reporter the new session of Congress Begins work tomorrow. But the players look very similar to the ones in place now, so theres a good chance the partisanship we saw last year will continue. Sylvia hall, n. B. R. , washington. Back in recession. Thats about all the good i can say for it. This deal is the ultimate political punt. It is december, it is the last minute. Were all glued to cspan after midnight to see what will happen, and politicians come together to do the absolute minimum. Im glad we didnt go over the cliff, but thats about all you can say. They did nothing to fix the underlying deficit and debt problems that are really, really damaging to this country and this economy. Tore if yo. Tom if you listen to the congressional office. Help us out. They say the tax cuts approved will add 4 trillion to the debt over the next 10 years, to sequester the coming spending cuts if enacted as planned, that will cut 1. 2 trillion. So netnet, we still have red ink. Were on track to be adding trillions and trillions of dollars to the debt over the next decade. What we want to do is remember back in the old days, we used to talk about balancing the budget. Were nowhere close to being able to do that now. What we want to do is get this budget to a point where the debt is not growing faster than the overall economy, where we stabilized the debt and were actually putting it on a downward path. This deal doesnt come close to do that. Doing that. We extended trillions of dollars with tax cuts. And people werent willing to let taxes go up on most americans. But lets not forget, were going to have to raise revenues as part of a budget deal, and we only raised a small amount. Democrats wanted 1,000,000,000,006. And republicans wanted less. On the other side of the lecher, on spending and entitlements, we did nothing. There is so much more we have to do. Tom we have another cliff coming march 1st. The debt limit, were going to be up against, as well as the sequester cuts they put off until march 1st. Can the spending cuts wait . The spending cuts can wait if were serious about putting them in place. What concerns me is that the fiscal cliff was the perfect opportunity to not go off the cliff, but replace it with a comprehensive sensible debt deal. Because politicians werent able to do it this time, im more nervous than before. But we have two critical months coming up where we have to make the case and bring politicians together in a bipartisan way to look at all parts of the budget, look at what spending we can cut, how to fix entitlement, and how do to tax reform. We didnt do the tax reform. Which is part of the iosutoln. We made the temporary tax cuts permanent for those making less than 400,000. Even after taking the country to the brink of economic disaster, washington could still not forge a consensus to stabilize the debt. Right to your point, is there together systemic preventing a comprise . People arent willing to make the hard choices. People arent willing to level with the american public. We cant just talk about raising taxes on the super dopplesuperduper wealthy. We have to talk about really raising revenues, really fixing our entitlement programs, bringing spending down gradually, and we have to have an honest discussion. The second problem, though, is this is a political fingerpointing dec bacdeb back bocal. And we have to face the tackling tough challenges or were going to fail. Tom Maya Macguineas has been watching it all. Thank you. Susie will americans take to the malls, now that washington has moved beyond the fiscal cliff . Still ahead, the outlook for consumer and business spending. Here on wall street, the dow posted its biesint ggint poga ve r fiegge thrst trading day of the year. The blue chip index surged 308 points or more than 2 to close at 13,412. The nasdaq did even better, up 3 for a gain of 93 points, while the s p 500 tacked on 36. But the nations fiscal hangover continues in the new year. Suzanne pratt takes a look at how much it could hurt investors. Reporter the new years holiday may be over, but stock investors continued partying on the first trading day of 2013. They were celebrating a resolution to the fiscal cliff, after weeks of uncertainty clouded the outlook for the stock market and the economy. Big board Trader Jonathan Corpina says investors are pleased the u. S. Isnt a total embarrassment around the world. I think the fact that we have some sort of resolution put in place for a short period of time is viewed positive into our markets. I think the transparency, the information, some solid facts out of washington is helping this market move higher. Reporter still, wall street, if anything, is good with numbers. And, many market pros worry a deal with higher taxes and no spending cuts is not going to add up for investors. So, expect the stock market to fixate now on how washington tackles spending and the debt ceiling. Investors should buckle up for another bumpy ride, with the white house and lawmakers in the drivers seat. Sadly washington is going to continue to be a focus because we only solved a little bit of the problem with this negotiation of the last several days. We still have the federal debt limit increase to go through. That promises to be a lot more contentious debate. Reporter and, dont forget, Quarterly Earnings season for Corporate America starts next week, with alcoa on tuesday. The circus in washington may get most of the headlines, but Company Fundamentals could also cause problems for equities. I think youre probably going to begin to see this market begin to tread water fairly quickly, not move up going very much, not down very much as we begin to worry about what those Fourth QuarterEarnings Releases will look like and what sort of guidance management will give about 2012 earnings. Reporter if investors can forget about washington for a moment and focus on history, they might find another reason to celebrate. It turns out a positive start for stocks in the first five trading days of the year, almost always correlates with a healthy gain for the full year. Suzanne pratt, n. B. R. , new york. Susie david kelly is predicting u. S. Stocks will gain 10 this year, and for the next five years. Hes chief global strategist at j. P. Morgan funds. Susie that is a very positive forecast, david, make a case for that forecast, why you think stocks are going to rally beyond today . Well, let me clarify. What im saying is on average, stocks can give you a 10 return over the next five years. Im not going to try to predict what theyre going to do in each individual year. Theyre too volatile for that. First of all, we have actually made progress. This deal i know nobody likes the process, and very few people like the product. But we have seen some progress here. This calendar year, 2013, the deficit will be about 5. 4 of g. D. P. With this teal in place. Four years ago, we were at 10 of g. D. P. We took it down a long way. If we can get the deficit down to 4 of g. D. P. , we will get to that position where the debt is not growing any faster than the economy over all. We havent just been kicking the can along the road. We have been picking up a few cans along the way. We have made some progress. I think that will help the markets move higher over the next few years as we get the results of the progress. Susie even if we set aside concerns about those budget battles in washington, you just heard suzanne pratts report where there are concerns about earnings coming on, guidance from companies, what their Spending Plans are going to be, what their hiring plans are going to be. How do you factor all of that in as you make your forecast for the year . Well, i think a lot of this has to do with uncertainty. I mean, a lot of taxes went up, and i think particularly the payroll tax went up today, which i think is very important. But the one tax that came down is the uncertainty tax. Washington has been building out uncertainty, which causes people to hesitate, businesses to hesitate. If you look at u. S. Corporate finances, the Balance Sheets of corporations, they are bloated with cash right now. The companies have money to spend, but theyre hesitating because they dont know what the story is going to be on taxes. As the government has clarified that a little bit in the last 48 hours, it should help businesses spend. Business spending will be one of the things that rs chiofee terhe the course of this year. Susie you identified a couple of sectors you think will do well in the the new year. You identify Consumer Discretionary stocks and financials. You cant name specifics here, but why do you like these areas . Well, i think the keything ie removing that uncertainty. If you look at the Consumer Finances, overall Consumer Finances have improved a lot. So big ticket cyclical items like new vehicles, like housing those things should do better. Corporate spending on new equipment should do better. I also think that improving Housing Market and just the passage of time is improving Financial CompanyBalance Sheets, and i think financials could do quite well. But there is a big drag in consumer spending. Because of the payroll tax. I think the single most important thing for the economy is the fact they didnt extend that 2 payroll tax cut. Im surprised it is not getting more attention today. Susie moving on to something else, you talked to a lot of individual investors, so you know about the fear factor. They want to put their money in a safe place, and that usually means treasuries or some kind of fixed vehicle income. What is your best advice for individuals going into this new year. I think people have got to get over this stock phobia. It has been developed over the last decade, a very bumpy ride for stocks. But if you look at the returns on cash, essentially zero on the savings account, and you look at the longterm balances, it has become very low. It is clear people should put more money into the stocks. The economy is going to be bumpy the first half of this year, but it will improve. People need to put money into equities. The important thing is just redefine safe. Safe is not keeping money in cash accounts or longterm treasury bonds, that are losing value over time. Safety is being diversified and taking a longterm view. If ever there was a year that proved longterm view, it was 2012 it was full of bumps. But if you stayed the course, it was a very successful 2012. I think taking a longterm view can work very well in 2013. Susie to take away,s redefine safety. Tom while house lawmakers took action on the fiscal cliff, they failed to take up a bill to help the victims of hurricane sandy. A vote on the 60 billion federal aid package has been delayed until tomorrow. That sparked outrage and finger pointing from new Jersey Republican governor chris christie. Theres only one group to blame for the continued suffering of these innocent victims, the House Majority and their speaker john boehner. This is not a republican or a democratic issue, National Disasters happen in red states and blue states. Tom boehners aides said the speaker will make the sandy relief bill his First Priority in the new congress, which will be sworn in tomorrow. Susie American Consumers and Business Executives are now doing the math on how that fiscal deal will impact their finances. A crucial question is where will they spend, and where will they cut back. Erika miller takes a closer look at how the deal will affect consumer and business spending this year. Reporter the fiscal cliff deal removes a major negative overhang for the u. S. Economy. Congress wasnt just voting on a fiscal package. They were voting on whether or not they wanted the economy to slip into contraction in the first half of 2013. Reporter but, its not clear the economy is in any better shape, as a result of the deal. Overall , it should be a little bit of a drag. When tax rates go up, there will be less money around to spend. There will be a lower savings rate most likely. Reporter the budget bill raises the top marginal tax rate to 39. 6 . Those top earners will also pay higher taxes on their investments. But, many of those households will be able to absorb the tax increases by lowering their savings rates. The bigger concern is what happens to spending by lower and middle income consumers. The decision not to extend the payroll tax cuts for all workers, means the average household will have a thousand dollars less income this year. A lot of working class and middle income households do live paycheck to paycheck. So if suddenly those paychecks are 1 to 2 points lower, that doesnt seem like a lot. But on an aggregate basis that certainly will add up. Reporter the fiscal agreement will also have an impact on spending by small and medium sized businesses. The majority of them are organized as passthru corporations, l. L. C. s, s corps, partnerships, and the like. And those Business Owners pay taxes at the ordinary income rate not the corporate rate which was unaffected by this deal. A lot of small Business Owners, in particular, pay the upper income tax rates. So if you boost the tax rates on them they can spend less money on things like employees, for example. Reporter the new fiscal agreement will probably have little impact on firms that are committed to hiring this year, but simply waiting for certainty on tax policy before finalizing their plans. So, consumer and business spending is not likely to improve dramatically in the First Six Months of the year. Most economists think thev . P recovery will continue to muddle along at a roughly 2 growth rate. Erika miller, n. B. R. , new york. Susie so, tom, we kick off 2013, not only with a stock market rally, but also the first merger deal or acquisition of the deal. With avis, which is buying zipcar, paying about a half billion dollars, works out to 12 a share. Thats a 49 premium over what zipcar closed on monday. We talked to an acquisition specialist on monday, and he was saying were going to see more of these kinds of deals in the year ahead. This was the first one for 2013. Tom and a real acknowledgement that the renting cars by the hour is real and growing. Avis, a more traditional company, said it hadnt paid much attention, and it is paying attention now, and avis shares up 5 in the deal. Clearly an enthusiastic response to training. The broad market in the bulls were clearly in the drivers seat on wall street. W thnee year, we have new deal on taxes, seeingne th major stock indices surge higher. The s p 500 staged a sharp rally right from the opening bell, responding to the congressional approval of the tax cut portion of the fiscal cliff. The rally held up evec t dingretienraagoos mcysthdyns warned more needs to be done to address the governments debt if america is to keep its triplea credit rating. Trading volume picked up with 857 million shares on the big board. 2. 1 billion traded on the nasdaq. The gains were broadbased. All 10 of the major stock sectors were up by more than 1. 5 . The best gains came in the telecommunications, Informational Technology and financial sectors. To illustrate just how wide todays stock rally was, consider two areas viewed eay indicators of market behavior. First, the transportationea sector. This Exchange Traded fund follows the dow jones transportation average. Todays 2. 5 rally breaks out the fund to its highest price since the ummer of 2011. The tatns tinpon rtiodustry is seen as an early signal of the economy. Ry and second smallcap stocks as measured by the Exchange TradedFund Tracking the russell 2000 index. The fund jumped 3. 1 toinhis at an alltime high. Small caps rallied twice as much as the dow industrials did last year. With a rising stock market, insurance stocks led the way for the financial sector. Metlife finished up by 6. 7 . Lincoln national gained 5. 8 . Hartford financial was higher by 5. 7 . These insurers have been hurt by er Government Bond yields eating into their investment portfolios. But today, Interest Rates werelo rising. The yield on the 10 year Government Bond jumped to 1. 84 . Thats still very low by historical standards, but its the highest yield, lowest bond price since september. In the technology sector, the biggest semor loownga dmo industrial stocks last year was one of todays big winners. Hewlettpackard rallied 5. 4 , putting shares over 15 per share for the First Time Since october. News of no tax hike for the majority of americans did not help stocks of some retailers like macys. Roll swious nnth ae nc wei many stores will announce their december Sales Results tomorro s macys stock was down 1. 8 . Kohls, which has struggled in recent months, fell the same. Teen apparel seller americanor eagle outfitter dropped 2. 1 . Investment Firm Jefferies downgraded its rating of a. E. O. To hold and cut its price target over worries about tough comparisons to its year ago results. Dole food company spoiled the optimism for the new year for its shareholders. The companys 2013 earnings outlook was disappointing, thanks to higher costs but aggressive price competition. Shares were hit, falling 13. 4 . Volume jumped more than 10 fold with shares settling at their lowest price since july. All of the five most actively traded Exchange Traded funds were stronger by at least 2 . The biggest gains came in the nasdaq 100 tracking fund, rising 3. 2 . And thats tonights market focus. Susie shell oil is preparing to send salvage crews to the waters in the gulf of alaska, thats where one of its oil rigs ran aground on new years eve. The kulluck platform is owned by shell, but operated by drilling firm noble corp. It was used for drilling test wells off the north slope of alaska last summer, and has about 140,000 gallons of diesel fuel on board. So far, cold weather and high waves have kept salvage crews at bay. Tom finally tonight, the new year marks a time when many people strive for personal improvement. And our viewers are no different. Heres allison worrell. Reporter among the long list of new years resolutions, Money Matters often is at the top when the ball drops. Viewer taylor shoemaker wants to payoff 10,000 to 15,000 in Student Loans this year. While Jessica Schulz says shes going to cut back on eating out. And rusty best plans to put more cash into his 401 k and roth i. R. A. Accounts. While all are good ideas for keeping more cash in your pocket, financial expert Gregg Mcbride says rustys idea may be the easiest way to save. Annual contribution limits for both i. R. A. S and 401 k s have increased this year so everybodys in a position to put more money in this year, than they did last year. And the beauty of the 401 k is that this money comes out of your paycheck directly before you have a chance to spend it. Thats the best way to save. Reporter he also says if you want Financial Resolutions to succeed, the best way to do it is by having a plan. Nothing helps you sleep better at night than knowing you have money tucked away for a rainy day, only one in four american households has an adequate Emergency Savings cushion, so three of four still have a lot of work to do in that area, make your goal in 2013 building up that Emergency Savings cushion. Reporter that way youll be in a better position to weather any unplanned financial storms in the new year. Allison worrell, n. B. R. , miami. Susie thats nightly Business Report for wednesday, january 2. Have a great evening everyone, and you too tom. Tom goodnight susie, well see you online at www. Nbr. Com and back here tomorrow night. Captioning sponsored by wpbt cptioned by Media Access Group at wgbh wces. Osgbh. Onrg join us anytime at nbr. Com. Gb