* Fiscal cliff negotiations move ahead, lifting banks, energy
* Gunmakers' shares fall in aftermath of school massacre
* Dow up 0.8 pct, S&P 500 up 1 pct, Nasdaq up 1.4 pct
By Rodrigo Campos
NEW YORK, Dec 18 U.S. stocks rose on Tuesday as investors positioned for a better economic environment as confidence grew a deal would be struck in Washington regarding the ongoing budget negotiations.
The gains added to Monday's rally, giving the S&P 500 its best two-day run in a month.
Sectors poised to grow during economic expansion led gains as investors remain confident that Washington will come to an agreement to avoid the "fiscal cliff" --a series of spending cuts and tax hikes before the end of the year that could hurt economic growth.
The PHLX oil services sector index jumped 2.6 percent with six 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.
"Risk takers get into the sector, betting on a bump in rig counts."
Hackett said the United States would avoid "whatever the cliff means" for the economy, allowing investors to focus on economic growth.
Financial stocks also rose sharply, 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 yield briefly hitting its highest since late October.
The S&P financial sector added 1 percent.
The Dow Jones industrial average rose 108.19 points, or 0.82 percent, to 13,343.58. The S&P 500 gained 14.40 points, or 1.01 percent, to 1,444.76. The Nasdaq Composite added 41.24 points, or 1.37 percent, to 3,051.85.
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.
Shares of firearm makers sank in the aftermath of a school shooting in Newtown, Connecticut, on Friday that killed 20 children and six adults.
Smith and Wesson fell 10.8 percent to $7.72 on its largest ever daily volume, though it was still up 77 percent so far this year. Sturm Ruger and Co slid 8.2 percent Tuesday to $40.39.
Technology shares rose led by Apple, up 2.3 percent above $530 after losing nearly 13 percent in the last two weeks. The S&P Information Technology Index rose 1.5 percent.
Arbitron Inc surged 23.6 percent to $47 after Nielsen Holdings NV agreed to buy the media and marketing research firm in a deal worth $1.26 billion. Nielsen rose 3.1 percent to $30.55.
GLOBAL MARKETS-US dollar falls as ECB, BOE turn hawkish; banks lead stocks up
* Yields rise as European central banks seen less accommodative