After showing a notable move to the downside in early trading, stocks showed a substantial turnaround over the course of the trading day on Wednesday. The rebound reflected optimism about the U.S. potentially avoiding the looming fiscal cliff.
The major averages saw further upside going into the close, ending the session near their best levels of the day. The Dow jumped 106.98 points or 0.8 percent to 12,985.11, the Nasdaq rose 23.99 points or 0.8 percent to 2,991.78 and the S&P 500 advanced 10.99 points or 0.8 percent to 1,409.93.
While worries about the fiscal cliff helped to drag stocks lower in early trading, the markets saw a significant recovery following remarks by House Speaker John Boehner, R-Ohio, who expressed optimism that lawmakers in Washington can reach an agreement.
"I'm optimistic that we can continue to work together to avert this crisis, and sooner rather than later," Boehner said at a press conference with Republican leaders.
Boehner continued to express opposition to higher U.S. income tax rates but once again indicated a willingness to consider increasing revenues if accompanied by spending cuts.
President Barack Obama also addressed the fiscal cliff in remarks at the White House, saying he hoped to reach a deal before Christmas.
As a result of the focus on the negotiations in Washington, traders largely shrugged off a report from the Commerce Department that unexpectedly showed a modest drop by new home sales in October.
The report said new home sales edged down 0.3 percent to a seasonally adjusted annual rate of 368,000 in October from the revised September rate of 369,000. The annual rate of new home sales in September was downwardly revised from the previously reported 389,000, which had represented a two-year high.
Economists had been expecting new home sales to inch up to 390,000 from the 389,000 originally reported for the previous month.
Brokerage stocks showed a strong move to the upside over the course of the trading day, driving the NYSE Arca Broker/Dealer Index up by 2 percent. The gain extended a recent upward move by the index, which has climbed well off the three-month closing low set earlier this month.
Knight Capital (KCG) posted a standout gain within the brokerage sector, surging up by 15.2 percent after receiving a takeover offer from speed-trading firm Getco.
Considerable strength also emerged among retail stocks, as reflected by the 1.4 percent gain posted by the Dow Jones Retail Index. Ann Inc. (ANN) and American Eagle Outfitters (AEO) posted notable gains after reporting stronger than expected quarterly earnings.
Software stocks also saw significant strength on the day, resulting in a 1.3 percent advance by the Dow Jones Software Index. Tobacco, oil, and steel stocks also posted notable gains, moving higher along with most of the major sectors.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.6 percent.
Meanwhile, the major European markets turned higher over the course of the trading day. While the French CAC 40 Index rose by 0.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index edged up by 0.2 percent and 0.1 percent, respectively.
In the bond market, treasuries moved moderately higher, continuing to recover from the notable pullback that was seen last week. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 1.617 percent.
Reports on third quarter GDP, weekly jobless claims, and pending home sales may attract some attention on Thursday, although the data is likely to be overshadowed by any developments in Washington.
by RTT Staff Writer
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