Stocks gain on hopes for a deal to avoid ‘cliff’
NEW YORK — Stocks gained on signs lawmakers are edging toward a deal that would help the U.S. avoid the “fiscal cliff.”
Indexes shrugged off an early loss and rose in afternoon trading Wednesday. The Dow Jones industrial average closed up 106.98 points at 12,985.11. It had been down as much as 112 points in early trading.
The Standard and Poor’s 500 was up 10.99 points at 1,409.93. The Nasdaq composite rose 23.99 points to at 2,991.78.
Huge tax increases and spending cuts will come into effect Jan. 1 if no deal on the U.S. budget is reached. Economists say the measures could push the country back into recession. President Barack Obama said he believed both parties can reach a “framework” on a debt-cutting deal before Christmas, while House Speaker John Boehner told reporters he was optimistic a deal could be reached, according news outlets including CNBC.
Craig Johnson, a Minneapolis-based technical market strategist at Piper Jaffray, said lawmakers realize there is too much at stake to allow the deadline to pass.
“I don’t think that anybody in Washington is going to do something so draconian, or so negative, that we’re going to trigger a recession,” Johnson said. “There will be some compromise.”
Concern the U.S. will go over the fiscal “cliff” has weighed on stocks since the Nov. 6 elections returned a divided government to power, with Obama staying in the White House and Republicans retaining control of the House.
Uncertainty about a possible increase in capital gains taxes has been prompting investors to sell stocks, said Johnson.
In economic news, U.S. sales of new homes dipped 0.3 percent in October, though they’re up 20.4 percent for the year, according to a government report. Stable home prices suggest the housing market is steadily recovering.
The yield on the 10-year Treasury note fell to 1.63 percent from 1.64 percent.