LONDON -- Stock index futures at 7 a.m. EST indicate that the Dow Jones Industrial Average will open 1.2% higher this morning, while the S&P 500 may open 1.4% higher. Also bullish is the CNN Fear & Greed Index, which closed up strongly at 70 on New Year's Eve, placing investor sentiment firmly in the "Greed" category.

Today's market action is expected to deliver a strong relief rally after lawmakers managed to agree a deal to avoid the sweeping tax increases that were due to kick in from Jan. 1. A bipartisan deal in the House of Representatives saw the deal pass by 257 to 167, although the majority of Republicans voted against the deal, which will see tax rates rise from 35% to 39.6% for individuals with incomes higher than $400,000. A 2% payroll tax cut will also be allowed to expire, affecting workers at most income levels.

Although the toughest decisions -- those on spending cuts and the debt ceiling -- still remain unresolved, these have been pushed down the road for two months and are unlikely to concern investors today. However, once the euphoria over yesterday's deal wears off, further volatility may be likely, especially if negotiations to increase the debt ceiling are pushed to the brink; the U.S. is already perilously close to its $16.4 trillion debt ceiling and is only being kept solvent by a temporary suspension of government contributions to the Civil Service Retirement and Disability Fund.


Economic data
Although company earnings reports are extremely sparse today, this morning's economic data may be of interest to investors. At 9 a.m. EST, December's Markit PMI is expected to show a fall to 53.1, down from 54.2 in November. At 10 a.m. EST, December's ISM manufacturing PMI is expected to have risen to 50.5, up from 49.5 in December. Finally, November construction spending is due at 10 a.m. EST and is expected to show a 0.8% increase, down from 1.4% the previous month.

European markets
European markets rose strongly in the wake of the fiscal-cliff deal this morning, with little domestic news to distract investors. In the U.K., the latest Markit PMI showed that the country's manufacturing sector returned to growth in December, with the index rising from 49.2 in November to 51.4 in December. However, 16 of the 17 eurozone member states saw manufacturing output fall in December, according to the same survey.

At 7:45 a.m. EST, the DAX was up 2.2%, the CAC 40 was up 2.5%, the FTSE MIB was up 3.4%, and the IBEX 35 was up 3.2%. In London, the FTSE 100 was up 2.3%, breaking through the 6,000-point barrier for the first time since July 2011. Glencore International led FTSE members, up by 6.7% at 7:30 a.m. EST. The top eight gainers were all miners, but Barclays was up by 4.7% following a broker upgrade, making it the top performer outside the commodity sector.

Billionaire investor Warren Buffett rarely invests outside the U.S., but he did recently invest $1 billion in an FTSE 100 blue-chip brand, expanding his stake in the company to more than 5%. The business concerned is a famous British name with global expansion potential -- and you can discover the identity of the company and the price he paid in this special exclusive report. Best of all, the report is free, so download it today while it's still available.

The article Dow Expected to Surge on Cliff Deal originally appeared on Fool.com.

Roland Head does not own shares in any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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