U.S. stocks rose on Tuesday, with the S&P 500 Index gaining for a fifth consecutive session, buoyed by optimism that Republicans and Democrats will eventually reach a deal to prevent the automatic spending cuts and tax hikes set to go into effect early next year.
The technology sector led the market higher, with Apple Inc. and Texas Instruments Inc. posting particularly strong gains.
The S&P 500 advanced 9.29 points, or 0.7%, to 1,427.84 — its highest closing value since Nov. 6, the day of the U.S. presidential election. The technology sector was the biggest gainer Tuesday among the S&P 500’s 10 major sectors.
The mood was buoyed by a report in The Wall Street Journal late Monday that budget negotiations between the White House and House Speaker John Boehner have made steady progress in recent days.
Addressing the House of Representatives Tuesday, Boehner said he was “hopeful” an accord would be reached. The Ohio Republican also said his party was waiting for President Barack Obama to outline specific spending cuts. Read: Republicans try to shift debate to spending.
Stocks pared gains after Senate Democratic Leader Harry Reid said Tuesday afternoon that a deal to avoid the fiscal cliff will be difficult to reach before Christmas.
“The markets are holding out hope this is all a big bluff,” Ethan Harris, co-head of global economics research at Bank of America, said of the back-and-forth on Capitol Hill that has not yet resulted in an agreement.
Common sense would dictate that the White House and Republicans would reach a compromise to avoid going over the fiscal cliff, but allowing the battle to linger on raises the risk that a deal won’t be reached, according to Harris, speaking at a BofA Merrill Lynch conference in New York Tuesday.
“It’ll probably go to the last second, and there’s a decent chance we go over the cliff and it will be spring before this is resolved. There is a high risk Obama and Boehner agree in principle to a deal and Congress doesn’t approve it,” he added.
After surging as much as 136 points, the Dow Jones Industrial Average closed up 78.56 points, or 0.6%, to 13,248.44, its highest closing level since Oct. 22.
The Dow rose for a fifth consecutive trading session, marking its longest win streak since mid-March. Chip manufacturer Intel Corp. was the top gainer in the Dow, rising 2.8%.
The Nasdaq Composite Index climbed 35.34 points, or 1.2%, to end at 3,022.30.
More than 690 million shares traded on the New York Stock Exchange; composite volume topped 3.6 billion.
Shares of TripAdvisor Inc. rallied after Liberty Interactive Corp. said it acquired voting control of the hotel-reviews site.
Apple’s shares rose 2.2%. ISI Group cited China Unicom’s announcement of more than 300,000 preorders for the iPhone 5 set to go on sale Friday. China Unicom is China’s second-largest wireless carrier.
Shares of Delta Air Lines Inc. rose 5.1% after it agreed to acquire a 49% stake in Virgin Atlantic Airways Ltd. from Singapore Airlines.
American International Group Inc. climbed nearly 6% after the Treasury Department said it would sell its remaining shares of the insurance company, nearly closing out its largest rescue that came with the 2008 financial crisis. Read: U.S. selling last AIG shares — booking billions in profit.
Federal Reserve officials started a two-day policy-setting meeting on Tuesday, with Wall Street expecting central bankers to opt for more bond purchases when Operation Twist expires this year.
Stock-index futures drew an early lift from an unexpectedly upbeat gauge of German investor sentiment, which rose sharply in December.
Marketwatch
