Why the Dow Exploded Higher This Morning

Wall Street may be the financial capital of the world, but today the stock market owes all of its gains to Washington. Despite having to wait beyond the changing of the calendar, investors finally got much of the clarity on taxes they had hoped for after the Senate came up with a fiscal-cliff compromise that the House managed to pass late last night. Although there are concerns about whether the deal will really avert a big drag on the economy in 2013, stocks around the world nevertheless soared, and the Dow Jones Industrials were up 237 points as of 10:45 a.m. EST., and broader markets were also up almost 2% in early trade.

In today's broad-based rally, all 30 Dow stocks are up. In fact, only Johnson & Johnson failed to post gains of at least 1%. Despite all the tax incentives preserved by the fiscal cliff deal, one thing J&J will have to deal with is the excise tax on medical devices, which went into effect yesterday. Between that and the fact that J&J is seen as a defensive stock that tends not to rise as much as the overall market during bull rallies, it's not surprising to see the health care giant's shares post only modest gains.

Outside the Dow, Zipcar rallied nearly 50% on news that Avis Budget will buy the car-sharing service for $12.25 per share. The move will help Avis keep up with industry rivals as it recognizes the growing trend toward Zipcar's flexible service. However, although Zipcar shareholders have to be pleased about a big one-day jump, over the past year they've taken substantial losses that they now won't have a chance to recoup in full.

Finally, the big losers for the day are volatility ETFs that were counting on a fiscal-cliff failure to create a big plunge. The iPath S&P 500 VIX ETN fell more than 7%, and leveraged exchange-traded VelocityShares Daily 2x VIX Short-Term ETN has sunk more than 15% on the day. Some argue that complacency will only leave the market open to a later, larger decline that could bode well for volatility ETFs. But for now, stock investors have gotten everything they've asked for.

The markets are up huge today, but you could be up much more over the long term. In fact, The Motley Fool wants to give you a 98.79% chance at beating the market. If you're interested in the best odds in the universe -- including more than a 70% chance at doubling the market's return over the long haul -- here's some very good news for you: Motley Fool Supernova is reopening to new members for the first time ever on Jan. 15! Get instant and free access to learn how you can get these kinds of market-beating odds by clicking here now.

The article Why the Dow Exploded Higher This Morning originally appeared on Fool.com.

Fool contributor Dan Caplinger has no positions in the stocks mentioned above. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Johnson & Johnson and Zipcar. Motley Fool newsletter services recommend Johnson & Johnson and Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.