US stocks up at end of 2012 as deal talks drag

US stocks finished 2012 with their strongest day in more than a month, putting the S&P 500 up 13.4 per cent for the year, as lawmakers in Washington continued to thrash out crucial “fiscal cliff” negotiations.

The S&P 500’s gain for the year marks its best performance since 2009, as stocks navigated through debt crises in Europe and the United States that dominated the headlines.

Fittingly, in the last session of the year, stocks bounced back and forth on the headlines out of Washington, as both President Barack Obama and Republican Senate leader Mitch McConnell issued statements indicating a deal to avert the cliff was close.

“The worst news could have been the president coming out and saying, ‘We don’t have a deal and we’ve giving up,’ and he didn’t say that,” said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, based in Scottsdale, Arizona.

“My personal skepticism, I don’t trust anything out of Washington until it is signed, sealed and delivered, and it is not signed, sealed and delivered.”

Despite the uncertainty over budget and tax issues, the market encountered only occasional bouts of volatility in 2012. For the first time since 2006, the CBOE Volatility Index or VIX, the market’s favoured indicator of anxiety, did not surpass the 30 level, a threshold that usually signals heightened worry among investors.

“Given all the threats in 2012, the VIX was relatively tranquil,” said Bill Luby, the author of the VIX and More blog in San Francisco, citing the crises in Spain and Greece, along with constant intervention from the Federal Reserve.

The Dow Jones industrial average gained 166.03 points, or 1.28 per cent, to end at 13,104.14. The Standard & Poor’s 500 Index gained 23.76 points, or 1.69 per cent, to finish at 1,426.19. The Nasdaq Composite Index gained 59.20 points, or 2.00 per cent, to close at 3,019.51. Markets were closed yesterday, but Monday’s gains enabled the S&P 500 to snap a five-day losing streak, its longest since September.

The S&P 500 finished 2012 with a 13.4 per cent gain for the year, while the Dow rose 7.3 per cent and the Nasdaq climbed 15.9 per cent.