Stocks head up on budget hopes
- Article by: STEVE ROTHWELL
- A ssociated Press
- December 17, 2012 - 7:04 PM
NEW YORK -- Stocks rose on Wall Street as investors were encouraged by signs of progress in budget talks in Washington. Just two weeks remain before tax increases and government spending cuts take effect if no deal is reached.
The Dow Jones industrial average rose 100.38 points to 13,235.39, its biggest gain this month. The Standard & Poor's 500 index climbed 16.78 points to 1,430.36 and the Nasdaq composite index rose 39.27 points to 3,010.60.
Marc Chaikin, CEO of the Philadelphia-based market research firm Chaikin Analytics, said investors became more hopeful for a resolution in the budget talks after House Speaker John Boehner made an offer to increase tax rates on high-income Americans.
"The fiscal cliff is obviously foremost on everyone's mind," Chaikin said.
Banks were among the best-performing stocks. Citigroup gained $1.55, 4.1 percent, to $39.15 after Raymond James raised its target price on the stock to $52 from $44. In a note to clients, the brokerage reaffirmed its "Strong Buy" rating, citing the "improving fundamental outlook." Bank of America also gained 42 cents, or 4 percent, to $11.
Investors are favoring financial stocks over technology stocks, said Ben Schwarz, chief market strategist at Lightspeed Financial.
"The banks are ripping today," Schwarz said. "People are looking for stability and the tech sector hasn't given them any."
Financial companies make up the best performing industry group in the S&P 500 this year, according to FactSet data. The group, which includes banks such as Wells Fargo & Co. and insurers such as Travelers, has gained 25 percent this year.
In Washington, there appeared to be movement in stalled budget talks aimed at avoiding tax increases and government spending cuts set to take effect Jan. 1, which are known as the "fiscal cliff."
Indexes opened higher following the news that Boehner, a Republican, offered $1 trillion in higher tax revenue over 10 years and an increase on the top tax rate for people making $1 million per year, to 39.6 percent from 35 percent. The market moved higher after news reports that Boehner met with President Obama at the White House.
Wall Street has been relatively calm in recent weeks, but David Kelly, chief global strategist for J.P. Morgan Funds, said that by Friday the market will be "squarely focused on what is or is not happening in Washington."
He suggested in a note to clients that the markets will not have "priced in" any outcome, "setting the stage for a market rally with an agreement and a slump with stalemate."
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