Stocks Lifted By Hopes Of Fiscal-Cliff Deal
U.S. stocks extended gains into a second session Tuesday, rising on signs of progress on Capitol Hill in reaching an accord to avoid steep spending cuts and tax increases next year.
“We’re seeing negotiations continue. Eventually they will come up with a deal, as I don’t think the sides are that far apart,” said David Kelly, chief market strategist at J.P. Morgan Funds.
Equities have risen on increased odds that the uncertainty presented by the so-called fiscal cliff would soon end, taking one of the risks to the economic forecast off the table, Kelly said.
“Politicians can argue about the minutiae of exactly which spending gets cut and which taxes go up, which is important, but the biggest tax being levied on the American people right now is the uncertainty tax, and President Obama and House Republicans now have the opportunity to lower it considerably,” Kelly said.
Stocks rose to session highs after House Republicans held a news conference to say they would continue to negotiate while working on an alternative plan that would include tax hikes for Americans making more than $1 million a year.
Tallying another triple-digit rise, its first such two-day streak since July, the Dow Jones Industrial Average finished at 13,350.96, up 115.57 points, or 0.9%.
The S&P 500 Index gained 16.43 points, or 1.2%, to 1,446.79, with technology and energy leading gains among its 10 industry sectors.
“In my humble opinion, there would have to be a ‘grand bargain’ for the S&P to take out 1,474 resistance. Kicking the can down the road on many issues would make the market ripe for a ‘sell on the news’ day if we are near the 1,474 high on the S&P,” emailed Elliot Spar, market strategist at Stifel Nicolaus.
The Nasdaq Composite Index gained 43.93 points, or 1.5%, to 3,054.53.
For every stock that declined almost three gained on the New York Stock Exchange, where 821 million shares traded. Composite volume topped 4.1 billion.
Hopes for a budget deal were lifted after President Barack Obama reportedly cut his tax-revenue demand to start tax-rate hikes at $400,000 in income instead of $250,000. See: Where Obama and Boehner have backed down in fiscal-cliff talks.
Wall Street continued its trend of bypassing economic reports to fixate on the fiscal cliff.
“Between the horrible tragedy in Connecticut last week and Christmas coming up next week, people don’t have a lot of time for economic numbers,” said Kelly, who added that whatever attention remains “is being soaked up by this fiscal-cliff debate.”
Dick’s Sporting Goods Inc. has suspended sales of modern sporting rifles around the country after 26 people, mostly children, were shot to death at an elementary school in Newtown, Conn., four days ago.
The National Association of Home Builders/Wells Fargo Housing Market Index in December rose to the highest level in more than six years.
The housing data are significant, since the majority of spending is done by homeowners, creating a wealth effect, according to Randy Frederick, managing director of trading and derivatives with the Schwab Center for Financial Research.
“They may not have new cash in their pocket, but they feel wealthier,” said Frederick. “The economy is more solid than anyone realizes, and housing is part of why the market has held up so well despite the fact we don’t have the fiscal cliff resolved yet.”
Marketwatch
