US markets up on hopes of economic deal

THE S&P 500 ended at its highest level in almost two months yesterday on rising hopes that negotiations over the “fiscal cliff” were making progress and that a deal could be reached in days.

After weeks of stalemate, President Barack Obama and Republican House Speaker John Boehner met at the White House, raising hopes that Washington will be able to head off steep tax hikes and spending cuts that threaten the economy.

All of the S&P 500’s 10 sectors were higher, led by financials and other growth-oriented sectors. The S&P Financial Index gained 2.1 per cent, while the S&P consumer discretionary sector was up 1.8 per cent.

Investors worry the US economy could slide into recession if the tax and spending changes are implemented so suddenly.

Boehner has edged closer to Obama’s position by proposing to extend lower tax rates for everyone who earns less than $1m. Still, his position remains far from that of President Obama.

“Trumping everything right now are the fiscal cliff talks. It seems like progress is being made. I think it’s getting to the nitty gritty,” said Alan Lancz, of Alan B. Lancz & Associates.

The Dow Jones industrial average was up 100.38 points, or 0.76 per cent, at 13,235.39. The Standard & Poor’s 500 Index was up 16.78 points, or 1.19 per cent, at 1,430.36, its highest close since Oct. 22. The Nasdaq Composite Index was up 39.27 points, or 1.32 per cent, at 3,010.60.

In the financial sector, shares of Bank of America rose four per cent to $11. American International Group shares rose three per cent to $34.95.