Who's Afraid of the Fiscal Cliff? Stocks Soar
NEW YORK (
) -- The major U.S. stock averages soared Monday as positive housing market data gave extra mileage to a rally fueled by optimism over budget talks in Washington.
Upbeat earnings reports from
Lowe's
(LOW) - Get Report
and
Tyson Foods
(TSN) - Get Report
also boosted investor confidence after last week's deep pullback. The surge occurred despite rising tensions in the Middle East as Israeli and Palestinian forces
continued to exchange rocket fire
in the Gaza Strip area.
The
Dow Jones Industrial Average
spiked higher by nearly 208 points, or 1.65%, to close at 12,796. The blue-chip index, which has lost ground in five of the past six weeks, is now up 4.7% so far in 2012.
All thirty of the Dow's components finished in the green. Even
Intel
(INTC) - Get Report
, which was in negative territory for much of the session after surprising Wall Street with news that Paul Otellini plans to retire from the chip giant's chief executive officer in May, managed a slight gain.
The biggest blue-chip winners were
Bank of America
(BAC) - Get Report
,
Hewlett-Packard
(HPQ) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
, and
Verizon
(VZ) - Get Report
.
The
S&P 500
gained 27 points, or 1.99%, to close at 1387, while the
Nasdaq
climbed 63 points, or 2.21%, to settle at 2916.
Every sector in the broad market was higher with basic materials, capital goods, consumer cyclicals, energy, technology, and transportation all rising more than 2%.
Advancers outpaced decliners by about a ratio of 7.8-to-1 on the New York Stock Exchange and 3.7-to-1 on the Nasdaq. Volume totaled 3.36 billion on the Big Board and 1.77 billion on the Nasdaq.
U.S. budget discussions are expected to continue behind the scenes in Washington this week as President Barack Obama makes his tour through Asia. The president has provided reassurances that a U.S. budget agreement will be reached on time.
"Attention remains centered on the fiscal cliff," said Michala Marcussen, global head of economics at Societe Generale. "Recent developments give grounds for some cautious optimism, but history suggests that politics can be notoriously fickle. Our base case remains that a temporary extension is voted before year-end with a final agreement in early 2013. This will lift uncertainty and remove a significant headwind to recovery."
Monday's data provided some of the impetus for the rally. The National Association of Realtors reported sales of existing homes increased in October, even with some regional impact from Hurricane Sandy, by 2.1% to a seasonally adjusted annual rate of 4.79 million from a downwardly revised 4.69 million in September.
Sales were 10.9% above the 4.32 million-unit level in October 2011.
Economists, on average, expected an annual rate of 4.75 million for existing home sales in October.
The National Association of Home Builders' housing market index rose to a level of 46, which was better than the unchanged level of 41 predicted by economists.
"Overall, a strong reading on the housing market," said Ian Lyngen, a senior rates strategist at CRT.
The FTSE 100 in London closed up by 2.36%, while the DAX in Germany finished higher by 2.49%. Eurozone finance ministers are scheduled to hold a meeting in Brussels on Tuesday about extending more financial aid to Greece.
Japan's Nikkei average finished higher by 1.43% Monday amid rising anticipation of an opposition party victory in December, which is expected to result in the push for monetary easing. Hong Kong's Hang Seng index settled up 0.49%.
Gold for December delivery rose $19.70 to settle at $1,734.40 an ounce at the Comex division of the New York Mercantile Exchange, while January crude oil contracts finished up $2.36 at $89.28.
The benchmark 10-year Treasury fell 11/32, boosting the yield to 1.615%. The dollar was down 0.43%, according to the
U.S. dollar index.
In corporate news, shares of Lowe's closed up 6.2% after the home improvement products retailer posted third-quarter results that exceeded forecasts as revenue at stores opened at least a year rose 1.8%.
Cisco Systems
(CSCO) - Get Report
, the networking giant, announced Sunday it was buying privately held cloud computing company
Meraki
for $1.2 billion. Cisco's stock rose 1.7%.
Global orthopedic medical device company
Wright Medical Group
(WMGI) - Get Report
struck a deal to buy
BioMimetic Therapeutics
(BMTI)
for roughly about $190 million in cash and stock to boost growth opportunities in Wright's extremities business. Wright shares slid 1.7%, while BioMimetic shares soared 77.2%.
Republic Services
(RSG) - Get Report
shares increased 1.2% as Cascade Investments raised its stake in the provider of services in the domestic non-hazardous solid waste industry to 23%.
BP's
(BP) - Get Report
American Depositary Receipts rose 3% amid reports that the oil giant plans to spend as much as $5.9 billion repurchasing its stock.
Shares of Tyson Foods jumped 10.9% after the company posted better-than-estimated fourth-quarter earnings as strength returned to its chicken business.
News Corp
(NWSA) - Get Report
is expected to announce this week that it will acquire a 49% stake in the YES Network from the New York Yankees and its partners, according to
Reuters
, which cited a person with knowledge of the talks. The deal would value the sports channel at $3 billion,
Reuters
said. Shares advanced 2.9%.
-- Written by Andrea Tse and Joe Deaux in New York.
>To contact the writer of this article, click here:
Andrea Tse
.
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