Stocks Close Higher as Hope Rises for a Fiscal Cliff Deal

New York Stock ExchangeBy STEVE ROTHWELL

NEW YORK -- Stocks gained on signs that 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 that he was optimistic a deal could be reached, according news outlets including CNBC.

Craig Johnson, a Minneapolis, Minn.-based technical market strategist at Piper Jaffray, said lawmakers realize that 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 that 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 President Barack 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.

As the third-quarter corporate earnings period draws to a close, investors and traders have become increasingly fixated on the negotiations to cut the budget deficit. Before Wednesday's gain, the market slumped Tuesday after Senate Majority Leader Harry Reid said he was frustrated by the lack of progress in talks. The two moves canceled each other out, leaving both the Dow and the S&P 500 little changed for the week.

"We're all on pins and needles waiting for every bit of news, or rumors, coming out of Washington," said Ryan Detrick, a Cincinnati, Ohio-based technical analyst at Schaeffer's Investment Research. "That's what Wall Street is focused on. Everybody is watching the fiscal cliff."

Many companies are making special end-of-year dividend payments or moving up their quarterly payouts because investors will have to pay higher taxes on dividend income starting in 2013, unless lawmakers reach a compromise on taxes and government spending.

Costco, the wholesale club operator, surged $6.07 to $102.58 after the company said it would pay a special dividend of $7 a share next month, in addition to its regular quarterly dividend. Las Vegas Sands Corp. rose 5.3 percent Tuesday after the casino operator said it would distribute about $2.26 billion to shareholders before the end of the year. It rose another 1.3 percent Wednesday, gaining 60 cents to $49.96.

With the market's attention focused on the outcome of the "cliff" negotiations, some investors caution that the weakness in third-quarter corporate earnings bode poorly for the stock market.

"Think of corporate earnings as the canary in the coal mine," said Douglas Cote, chief market strategist at ING U.S. Investment Management. "Corporations are the first ones to signal that there is something going on with economic growth around the world."

Company earnings fell 0.9 percent in the third quarter, data provider FactSet said in a report Nov. 23. If they earning finish the period lower, it would mark the first decline in three years.

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.

A pickup in consumer spending and steady home sales helped lift economic growth in October and early November in most parts of the United States, the Federal Reserve said in its Beige Book survey released Wednesday. The one exception was the Northeast, which was slowed by Superstorm Sandy.

The yield on the 10-year Treasury note fell to 1.63 percent from 1.64 percent.

Among stocks making big moves:

• Green Mountain Coffee Roasters surged $7.91, or 27.3 percent, to $36.86 after the beleaguered coffee company reported strong fourth-quarter results and issued earnings and revenue forecasts that far exceeded the market's expectations.

• Fresh Market Inc. plunged $7.46, or 12 percent, to $52.78, after the company's fiscal third-quarter profit fell short of analysts' expectations.

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lpi2007

Stocks Close Higher as Hope Rises for a Fiscal Cliff Deal:::: ON HOPE... RETARDED RETARDS...

November 29 2012 at 4:51 AM Report abuse rate up rate down Reply
PBanks

I predict downfall from anything that does happen. What's left in business itself, will close. People who are in business will shut down, where they do make a good living over the 250,000 threshold. The debt is to high, for them and for us. Just on the local level, taxes are too high, kick the federal Obamacare taxes (21) taxeS AND pENALTIES A COMING. gO OUT OF BUSINESS NOW NOT LATER. iT'S NOT WORTH IT. LET US PRAY FOR A MIRACLE THAT THE DEMOCRATS LOSE THEIR FORTUNES AND THEY CRASH PELOSI AND REID.

November 28 2012 at 11:33 PM Report abuse rate up rate down Reply
jrexmarda

Stocks close higher out of boredom over Fiscal Cliff warnings. The term Fiscal Cliff to be retired. Stocks then continue their downward trend for a while until a new ominous designation is issued.

November 28 2012 at 9:41 PM Report abuse rate up rate down Reply
1 reply to jrexmarda's comment
freethedems2012

Sooner or later it will all come crashing down. We owe more than we can ever repay and keep printing more so what we have is worth less and less.

November 28 2012 at 9:51 PM Report abuse -1 rate up rate down Reply
1 reply to freethedems2012's comment
jrexmarda

They should call it the Tsunami of Financial Doom next.

November 28 2012 at 10:26 PM Report abuse rate up rate down
vlady1000

Have faith, they will drop back done soon (like usual). Glad I have my real money out of the hands of Wall Street. I just laugh at it all now. Al Capone would be a more trusting partner, than "The Wall Street Gang"

November 28 2012 at 9:36 PM Report abuse rate up rate down Reply
PBanks

The best thing for this country has far as pay back goes. If the Unions and the members who have ran their scam into the taxpayers bank- to get free money to make themselves rich-like millinaires. Wall Street with their money should go bust, Their should be a curse on them and all their friends. Lose your money lose your money lose your money- like Bloody Mary say it three time if with a little luck you are poor from the White house to the Senate and to Pelosi and Reid fortunes to boot.

November 28 2012 at 8:55 PM Report abuse rate up rate down Reply
Wisdom Seeker

The Fiscal Cliff would be better named the "Federal Government Spending Cliff".

November 28 2012 at 8:52 PM Report abuse -1 rate up rate down Reply
PBanks

The Democrats in the Senate from Virginia to Maine then go west to California is the Welfare country the takers. They are in charge of the Marxist Party from the Hitler of the 30s to perfecting the mistakes that Hitler made and working out in their left wing upper Education of Columbia and Harvard and Yale and Princeton University. The progressive are now using their techniques in the schools of our children with only the goal of making they stay stupid and the parents take the handouts and not want to be rich or join the country club. They know they got them, by the way the 18 to 29 years old voted this year The only problem is when there is no one that will have a store or gas station or any business on Main street-working or paying people to work. Just like Hitler the limit for coming back to bite them in the behind is there. Wall street want more free money from Treasury and taxpayers paying to keep them in business. That's it.

November 28 2012 at 8:43 PM Report abuse -1 rate up rate down Reply
pdbliz

The Democrates hate Bush so much,,,,go ahead and cancell the Bush Tax Cuts........SEE WHAT HAPPENS THEN,....REMEMBER,,,,THIS IS GOING ON 5 YEARS WE HAVE HAD A DEMOCRATE CONTROL.....AND,,,SEE WHERE WE ARE.!!!!!!!!!

November 28 2012 at 8:13 PM Report abuse -1 rate up rate down Reply
retpo96

Let's take that leap off the cliff and end the Bush tax cuts and bloated and wasteful defence spending.eliminate loopholes and reset!

November 28 2012 at 7:28 PM Report abuse +2 rate up rate down Reply
hemipwr54

Stocks close higher due the Greed.
Merry Greedmas!

November 28 2012 at 5:32 PM Report abuse +2 rate up rate down Reply