NEW YORK: US stocks ended the pre-Christmas week with a solid jump Friday after under-the-gun legislators agreed to extensions of temporary tax breaks and unemployment benefits slated to expire December 1.
Stocks opened higher and climbed through the day, unhindered by some tepid data on home sales and consumer income and spending which were little-changed in November.
A surge in the last 15 minutes then pushed the Dow's gains over one percent.
The Dow Jones Industrial Average closed up 124.35 points (1.02 percent) at 12,294.00.
The broader S&P 500 gained 11.33 (0.90 percent) to 1,265.33, while the Nasdaq Composite rose 19.19 (0.74 percent) to 2,618.64.
Republicans in the House of Representatives caved in to pressure to agree the two-month extensions that, if not passed, could have weakened the economy's growth surge of the past three months.
Within hours President Barack Obama signed the legislation, clearing out a contentious issue that threatened to spoil the year-end holidays for millions.
"The reprieve is only temporary, as Democrats and Republicans will revisit this fight in another two months," warned Paul Edelstein at IHS Global Insight.
"Now, markets are reacting positively but cautiously, hopefully keeping expectations in check. The risk of an overshoot and subsequent correction triggered by some unforeseen shock is always in the cards. This will continue to be a sub-par and uneven recovery."
Troubled iconic photography firm Kodak jumped 10.8 percent to 70 cents after elevating the company's general counsel Laura Quatela to co-president, and announcing it would sell off a small business, Eastman Gelatine, which makes a gelatin used in film and paper emulsions.
Mead Johnson Nutrition lost another 5.1 percent, following Thursday's 7.9 percent plunge, amid worries that its Enfamil infant formula might be linked to the death of a newborn boy from a rare bacterial infection.
Shares of web-based photo sharing and printing firm Shutterfly lost 4.5 percent after lowering its earnings guidance for the fourth quarter.
Bond prices slipped. The yield on the 10-year Treasury rose to 2.03 percent from 1.95 percent late Thursday, while the 30-year yield rose to 3.05 percent from 2.98 percent.
Bond prices and yields move in opposite directions.
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