Stocks Jump on Budget Optimism

"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.

"The Census report collects data for new single-family houses, but does not capture the recent strength in rental demand, most of which is reflected in a boost in multifamily construction activity," they said. "Slower progress in the single- family sector than in the multifamily sector is consistent with much of the pick-up in residential demand being driven by investors rather than owner-occupiers. Nonetheless, we expect new single-family housing demand to continue its modest upward trend throughout the next year, driven by record-high affordability."

The FTSE 100 in London closed up 0.06% on Wednesday, while the DAX in Germany added 0.15% despite uncertainties over the U.S. fiscal cliff and debt ceiling and skepticism about Greece's debt deal.

The European markets cut some of their losses as the trading session progressed after a decent Italian debt auction and the European Commission gave the green light on the restructuring of four Spanish banks, paving the way to their ability to tap into funds from the European Stability Mechanism.

Japan's Nikkei average settled lower by 1.22% and Hong Kong's Hang Seng index finished off by 0.62% as worries persisted that a fall by the U.S. over the fiscal cliff could help tip the world economy into a recession.

Gold for December delivery was off $25.80 to settle at $1,716.50 an ounce at the Comex division of the New York Mercantile Exchange, while January crude oil contracts were off 69 cents to close at $86.49 a barrel.