U.S. stocks finished higher on Monday, with financials leading the advance, buoyed by reports of progress in Washington toward reaching a deal to avoid the fiscal cliff of tax and spending measures that could tip the economy back into recession.
“Bets appear to be increasing on a deal getting done,” said Michael Gayed, co-portfolio manager of the ATAC Inflation Rotation Fund . “The spread of the Russell 2000 small-cap index to the large-cap S&P 500 indicates money is comfortable in more domestically-sensitive parts of the stock market which, in turn, is a direct bet on a fiscal-cliff deal.”
The Dow Jones Industrial Average climbed 100.38 points, or 0.8%, to close at 13,235.39, with the benchmark index scoring its first gain in four sessions. Shares of Bank of America Corp. , up 4%, and J.P. Morgan Chase & Co. , up 1.6%, were among the biggest gainers.
The S&P 500 index added 16.78 points, or 1.2%, to end at 1,430.36, with financials the best performing of its 10 major industry groups. The consumer staples sector was the leading laggard.
The “big outperformance in big banks is precisely how healthy markets behave, and the move higher could easily have legs despite the growing chorus of New Year bears who are arguing that a market drop is imminent,” said Gayed.
The Nasdaq Composite Index advanced 39.27 points, or 1.3%, to 3,010.60, finishing near the session’s high of 3,011.22.
Apple Inc. said it sold more than 2 million iPhone 5s in China. Shares of the company closed up 1.8% at $518.83 after tapping a low at $501.23.
Pacific Crest and Canaccord Genuity on Monday cut their price targets on the stock, citing new concerns about iPhone sales. Citigroup late Sunday lowered its rating on the stock to neutral from buy.
Advancers outpaced decliners by two to one on the New York Stock Exchange, where volume neared 702 million and composite volume topped 3.4 billion by the close.
Shares of Clearwire Corp. dropped 14% after the company’s board approved Sprint Nextel Corp.’s offer to buy the roughly 50% stake in Clearwire it doesn’t already own.
The gains for the stock market came as U.S. budget talks appeared to make progress. House Speaker John Boehner and President Barack Obama met at the White House Monday after Boehner made a new offer on taxes and the U.S. debt ceiling. Listen to audio: Investors awaiting fiscal cliff deal
Boehner, over the weekend, reportedly offered to allow higher taxes on incomes of $1 million and above and to increase the debt ceiling for one year.
The gains in equities can last as long as the Republicans and Democrats are still talking, said Matthew Tuttle, chief investment officer at Tuttle Wealth Management LLC.
For now, there’s optimism that “there will be a deal either before year-end or shortly after, which would be OK as long as it is expected and retroactive,” he said.
Investors shrugged off data showing that the Empire State manufacturing index remained in negative territory for the fifth month in a row.
In the currency markets, the dollar touched its strongest level against the Japanese yen since April 2011, after the Liberal Democratic Party won a landslide victory in Sunday’s election in Japan, reinforcing expectations of further monetary easing.
U.S. Treasury prices, meanwhile, declined, with the yields on the 10-year note up at 1.77%, their highest since late October. The Japanese yen and Treasury rates tend to be closely correlated, since Japan is one of the biggest buyers and holders of Treasurys.
Gold futures finished with a slight gain, but stayed below $1,700 an ounce, while Middle East tensions helped provide a lift to oil prices.
Marketwatch
