US stocks have shot up in opening trade on news of a fiscal cliff deal in Congress that prevents most tax increases and delays sharp spending cuts.

The Dow Jones Industrial Average was up 1.8 per cent in the first minutes of trade on Wednesday, while the Nasdaq Composite topped 2.8 per cent.

The broad-market S&P 500 gained nearly 2.0 per cent.

In the first trading day of the new year, Wall Street joined a global equities rally celebrating the passage of a bill that avoids the “fiscal cliff” of automatic spending cuts and tax increases.

While markets were closed on Tuesday for the New Year’s Day holiday, lawmakers approved a compromise bill that raises taxes on the rich and puts off automatic $US109 billion federal budget cuts for two months.

If they had failed, Americans would have been hit by sweeping tax hikes, and spending cuts would have kicked in across the government, in a combined $US500 billion shock that could have rocked the fragile recovery.

AFP