Stocks Jump on Budget Optimism

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"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.

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The benchmark 10-year Treasury rose 3/32 to dilute the yield to 1.630%. The dollar lost 0.05%, according to the U.S. dollar index.

In corporate news, Green Mountain Coffee Roasters (GMCR) blew past Wall Street's expectations in its fiscal fourth quarter. Shares surged 27.3%.

American Eagle Outfitters (AEO) shares jumped 7.1% after the Pittsburgh-based teen apparel and accessories retailer hiked its full-year outlook to $1.38 to $1.40 a share from its previous outlook of $1.33 to $1.36 a share as it posted better-than-expected third-quarter results.

Express(EXPR) shares advanced 8.9% after the specialty apparel and accessory retailer booked stronger-than-anticipated fiscal third-quarter profit and gave higher-than-estimated fourth-quarter guidance amid strength in its Black Friday sales.

Fresh Market (TFM) shares tumbled 12.4% amid some concerns about the company's full-year guidance. Fresh Market posted third-quarter profit that was in line with expectations.

Costco Wholesale (COST) , the warehouse retailer, plans to pay a special dividend of $7 a share, or about $3 billion. Costco also said Wednesday that first-quarter sales jumped 10%. Shares popped 6.3%.

Virtu Financial has emerged as the early front-runner to buy Knight Capital Group (KCG) in a deal expected to value the brokerage firm at more than $1 billion, The Wall Street Journal reported, citing people briefed about the continuing sale talks.