Wall Street climbs on economy bets as it looks past "cliff"

NEW YORK Tue Dec 18, 2012 5:14pm EST

Traders work on the floor of the New York Stock Exchange, December 18, 2012. Signs of compromise in U.S. talks to stop automatic tax hikes and spending cuts hurting the economy next year pushed world shares to their highest level since September on Tuesday and weakened investor appetite for safe-haven bonds and the dollar. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, December 18, 2012. Signs of compromise in U.S. talks to stop automatic tax hikes and spending cuts hurting the economy next year pushed world shares to their highest level since September on Tuesday and weakened investor appetite for safe-haven bonds and the dollar.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - U.S. stocks rallied on strong volume on Tuesday, capping off the S&P 500's best two-day run in a month, on confidence that a deal would be struck in Washington to avoid painful spending cuts and tax hikes that could hurt the economy.

Banks, energy and technology - sectors that would benefit during economic expansion - led gains as investors remain confident that lawmakers will come to an agreement to avoid the so-called "fiscal cliff" deadline at the end of the year.

The PHLX oil services sector index .OSX jumped 3.1 percent, with eight of its 15 components up 3 percent or more.

"The view is that the economy is getting better, and that is always good for energy demand," said Shawn Hackett, president at Hackett Financial Advisors in Boynton Beach, Florida.

Hackett said the United States would avoid "whatever the cliff means" for the economy, allowing investors to focus on growth.

President Barack Obama's most recent offer to Republicans in the ongoing budget talks makes concessions on taxes and social programs spending. House Speaker John Boehner said the offer is "not there yet," though he remains hopeful about an agreement. Senate Democrats, however, have expressed concern about cuts to Social Security.

Financial stocks shot higher, as traders bet on a greater demand for loans and a steepening of the yield curve. U.S. government debt sold off Tuesday, with the benchmark 10-year U.S. Treasury note's yield briefly hitting its highest since late October.

The S&P financial sector .GSPF added 1.5 percent.

The Dow Jones industrial average .DJI rose 115.57 points, or 0.87 percent, to 13,350.96 at the close. The S&P 500 .SPX gained 16.43 points, or 1.15 percent, to 1,446.79. The Nasdaq Composite .IXIC added 43.93 points, or 1.46 percent, to 3,054.53.

It was the S&P 500's first back-to-back gain of more than 1 percent since late July.

Stocks of smaller companies outperformed the broader market, with the Russell 2000 .RUT up 1.5 percent.

Shares of firearm makers sank in the aftermath of a school shooting in Newtown, Connecticut, on Friday that killed 20 young children and six adults.

Smith and Wesson (SWHC.O) fell 10 percent to $7.79 on its largest-ever daily volume, though it was still up about 77 percent so far this year. Sturm Ruger and Co (RGR.N) slid 7.7 percent Tuesday to $40.60.

Private equity firm Cerberus Capital Management said it would sell gunmaker Freedom Group, whose Bushmaster AR-15 rifle was used in the Connecticut massacre. Dick's Sporting Goods (DKS.N) suspended the sale of certain semi-automatic rifles in its stores nationwide.

Technology shares rose, led by Apple (AAPL.O), up 2.9 percent at $533.90 after losing nearly 13 percent in the last two weeks. The S&P Information Technology Index .GSPT rose 1.7 percent.

Arbitron Inc ARB.N surged 23.6 percent to $47.03 after Nielsen Holdings NV (NLSN.N) agreed to buy the media and marketing research firm in a deal worth $1.26 billion. Nielsen rose 4.4 percent to $30.92.

About 7.4 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, more than the daily average so far this year of about 6.5 billion shares.

On the NYSE, roughly 14 issues rose for every five that fell, while on the Nasdaq, advancers outnumbered decliners by a ratio of about 5 to 2.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

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Comments (3)
ralphos wrote:
So they want to avoid risk but bet against obstructionism silly.
Nothing good is coming same obstruction as before election party of no.
Until America cleans up the house and senate with one party.
No matter what party that is. Both side will from now on be the party of no. From now on it will have to be all or nothing elections you dont vote your whole ticket you want gridlock. dont want gridlock vote you whole ticket. There is no alternative anymore.

Dec 18, 2012 2:20pm EST  --  Report as abuse
windpower wrote:
The immediate extension of the Production Tax Credit (PTC) must be part of the final agreement of the fiscal clif negotiations.

Equipped with the production tax credit (PTC), the wind industry has been able to lower the cost of wind power by more than 90%, provide power to the equivalent of over 12 million American homes, and foster economic development in all 50 states.

American wind power has created tens of thousands of jobs and helped spur a manufacturing renaissance. Today nearly 500 U.S. manufacturing plants located in all regions of the country serve the industry.

All of this has been accomplished largely with an effective tax policy in the form of the production tax credit.

With the threat of the PTC’s expiration, wind project developers are not making plans in the U.S. and American manufacturers are not receiving orders. Job layoffs have started already, which could total up to 37,000 jobs lost.

Without an immediate extension of the Production Tax Credit, the wind industry is facing the recurrence of the boom-bust cycle it has seen in previous years when the PTC was allowed to expire.

David Ward, American Wind Energy Association

Dec 18, 2012 2:37pm EST  --  Report as abuse
But wasn’t the market supposed to go through the floor if we re-elected Obama?
Sterling Greenwood/AspenFreePress

Dec 18, 2012 3:32pm EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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