Stocks Jump on Budget Optimism
NEW YORK ( TheStreet) -- The major U.S. stock averages surged Wednesday on fresh hopes that the Democrats and Republicans will be able to work out a compromise during U.S. budget talks and avoid the fiscal cliff.
Both President Barack Obama and House Speaker John Boehner made positive statements about the progress being made on Capitol Hill.
The Dow Jones Industrial Average rose nearly 107 points, or 0.83%, to close at 12,985, after having been down by more than 100 points earlier in the session. The blue-chip index, which ended a two-day losing streak, is now up 6.3% so far in 2012.
Every sector finished higher, led by conglomerates, consumer cyclicals, and services.
Apple (AAPL) shares, however, fell 0.31%. The iPhone maker reportedly fired William Richardson, the tech giant's senior director of iOS services, over the failure of its new Maps app. Richardson was fired before Thanksgiving, the report said.
Volume totaled 3.34 billion on the New York Stock Exchange, and 1.73 billion on the Nasdaq. Advancers ran ahead of decliners by a 2.3-to-1 ratio on the Big Board and 1.4-to-1 on the tech-heavy index.
BNP Paribas economists said in a note that "we remain optimistic that a deal will be reached before year-end that will defer the bulk of the fiscal cliff."
However, the BNP economists added that the base effects and ongoing uncertainty over the fiscal cliff and the near-term impact of Hurricane Sandy are likely to leave investment growth negative in the fourth quarter.
"After the fiscal cliff, it's going to be the debt ceiling, so there's always going to be these potential issues on our forefront ... there's always these continuing issues," said Brian Peery, co-portfolio manager at Hennessy Funds. "So I think right now the American public is just so disappointed that they're acting more like children than like Congressmen and I think if we can just turn that situation around and have our politicians looking really for our best interest as a country, I think everybody will feel a lot better about it."
The Census Bureau reported Wednesday that new-home sales fell to an annual pace of 368,000 in October from a downwardly revised 369,000 in September. Economists were expecting new-home sales of 390,000 in October.
BNP Paribas economists noted that October's 32% decline in the Northeast was likely a result of Hurricane Sandy's disruptions at the end of the month, and offset by a 62% jump in sales in the Midwest, as the South and the West experienced smaller movements in the month.