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Stocks gain on optimism that budget deal is near
NEW YORK (AP) — Stocks climbed on Wall Street on Tuesday, pushing the Standard and Poor's 500 to its highest level in two months, amid optimism that lawmakers are closing in on a budget deal that will stop the U.S. from going over the "fiscal cliff" at the beginning of next year.
The Dow Jones industrial average rose 107 points to 13,342 as of 1:58 p.m. EST. The Standard & Poor's 500 gained 14 points to 1,444. Earlier it went as high 1,447, the highest since Oct. 19. The Nasdaq composite rose 38 points to 3,049.
House Speaker John A. Boehner told reporters he remains hopeful that a fiscal cliff compromise can be reached, but he said President Obama has yet to offer a balanced deficit-cutting plan. Mr. Boehner said Mr. Obama's latest offer for $1.3 trillion in tax increases over the next decade with $850 billion in spending cuts is not enough. The White House said Mr. Obama has moved halfway to meet Mr. Boehner on budget deal.
"People are cheering the prospect for some compromise in Washington right now," said Joe Costigan, director of equity research at Bryn Mawr Trust Co. "At the moment there is some pretty good news and the market is reacting favorably to it, but the deal isn't done yet."
Stocks slumped after the presidential election on Nov. 6 over concerns that a divided government would struggle to reach an agreement before Jan. 1, when a series of series of tax increases and government spending cuts is scheduled to take effect if no deal is reached. Those measures could push the U.S. back into recession. The S&P has since recouped all of those losses.
Yet, some investors say that stocks are already pricing in too much optimism. Any deal, while ensuring that the economy avoids the full impact of the fiscal cliff, will still involve higher taxes and less government. That will be a drag on economic growth, said David Wright, a managing director and co-founder at Sierra Investment Management in Santa Monica, Calif.
"There a just too many naive people thinking that the agreement itself is a significant event — it isn't," Mr. Wright said. "The implementation is going to be negative for the economy."
Stocks also moved a leg higher immediately after Standard & Poor's rating agency said it had raised Greece's credit grade by 6 notches to B-, lifting the country out of default. The threat of a Greek default had roiled markets in the first half of this year. Investors fretted that the heavily indebted nation would leave the euro, opening the way for a breakup of the currency block. The ratings firm said the upgrade reflected its views that the other 16 countries using the euro are determined to keep the Greece inside the currency union.
The Dow Jones is up 2.4 percent in December and is on track to close higher for a fourth straight year. The index has advanced 9 percent in 2012. The S&P500 is also up for the year, gaining nearly 15 percent.
Allstate Corp. gained 66 cents to $41.44 after the company's board of directors approved a plan to buy back up to $1 billion of the insurer's shares by the end of the year.
Eli Lilly also advanced after saying it would buy back its own stock. The drug manufacturer rose $1.01 cents to $49.34 after saying that its board had approved a $1.15 billion share buyback.
The yield on the 10-year Treasury note climbed 6 basis points to 1.83 percent. The yield has climbed 22 basis points since the start of the month.
Among stocks making big moves today:
• Arbitron, a provider of radio ratings, surged $8.96 to $46.99 after the TV ratings company Nielsen said it would buy Arbitron for about $1.26 billion.
• FactSet Research Systems Inc., a provider of financial information to investors, fell $3.69 to $92.70 after it reported earnings and revenue that fell short of analysts' estimates.
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