Stocks are positioned to spring higher into the New Year, on the prospects of a "fiscal cliff" deal.
"The cliff got smoothed today," said Steve Massocca of Wedbush Securities. Stocks shot higher in late trading Monday as details were still being ironed out, but there were signs a deal was at hand that would pass the Senate and then be sent to the House. After the close, stock futures continued to rally, with Dow futures up more than 200 points.
"I think the market thinks there's a deal, and the market's going to move higher," said Massocca.
If the deal Congress was working on Monday is adopted in the next couple of days, tax hikes will be avoided for most Americans, but raised for individuals earning more than $400,000 a year. The "fiscal cliff" is the $600 billion expiration of tax cuts and the onset of spending cuts that were set to take place starting Jan. 1 if Congress took no action.
The White House said late Monday that a deal had been reached with Senate Republicans. The Senate overwhelmingly passed the bill, 89 to 8, in a middle-of-the-night vote. The House will take it up on New Year's Day.
Technically, even with this agreement, the U.S. would go over the cliff, when the tax increases and spending cuts kick in at midnight. However, any legislation reached in the next few days could be backdated. So, a quick resolution would make it more like "bungee jumping" -- falling over the cliff and then bouncing back above it.