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US STOCKS-Wall St hits 2-year high after tax cut deal

 * Deal to extend tax cuts boosts stocks
 * S&P 500 rises to two-year high, above key resistance
 * Govt sale of Citi shares could boost S&P
 * Indexes up: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 0.6 pct
 * For up-to-the-minute market news see [STXNEWS/US]
  (Updates to midday)
 By Edward Krudy
 NEW YORK, Dec 7 (Reuters) - U.S. stocks climbed to a fresh
two-year intraday high on Tuesday as investors bet a deal to
extend tax breaks will prompt increased spending and buoy the
economy while preserving returns for shareholders.
 Investors have said the tax cuts were necessary to keep the
fragile recovery on track and could lead to more spending and
investing. Increasing capital gains and dividends taxes would
hurt shareholder returns.
 U.S. President Barack Obama forged a deal with Republicans
to renew Bush-era tax cuts for wealthier Americans as well as
the middle class. The deal was expected to extend breaks on
dividends and capital gains. For details, see [ID:nN06211347]
 Optimism over the agreement sent the S&P 500 to a new
two-year high and above the 61.8 percent Fibonacci retracement
of the 2007-2009 bear market slide, a level closely followed by
traders.
 The Dow Jones select dividend index .DJDVY, which
measures top dividend-paying companies, rose 0.6 percent.
 "There should be no hesitation on the part of the market
that from an investor's perspective tax cuts are always an
unambiguously good thing," said Kevin Caron, market strategist
at Stifel, Nicolaus & Co in Florham Park, New Jersey.
 The Dow Jones industrial average .DJI gained 49.61
points, or 0.44 percent, to 11,411.80. The Standard & Poor's
500 Index .SPX rose 6.17 points, or 0.50 percent, to
1,229.29. The Nasdaq Composite Index .IXIC added 15.75
points, or 0.61 percent, to 2,610.67.
 The U.S. government sold its remaining stake in Citigroup
Inc C.N, a move that could lift the S&P 500 as the company
moves to a 100 percent float, according to Credit Suisse.
 Credit Suisse estimated that portfolios following the S&P
may need to buy up to 375 million Citigroup shares, although
the timing of the purchases was uncertain. Citigroup rose 3.7
percent to $4.61.
 Many top dividend-rich shares outperformed the wider
market, with Dow Chemical Co DOW.N up 1.1 percent to $33.89
and AT&T Inc T.N adding 0.9 percent to $28.56.
 Some investors have feared a higher dividend tax could
reduce the attractiveness of such stocks compared to
fixed-income assets.
 Nicor Inc GAS.N climbed 4.9 percent to $49.05 after
natural gas distributor AGL Resources Inc AGL.N agreed to buy
Nicor, a peer. AGL shed 5 percent to $35.25. [ID:nSGE6B608J]
  (Reporting by Edward Krudy; additional reporting by Chuck
Mikolajczak; editing by Jeffrey Benkoe)






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