US stocks bounced higher for a second consecutive session yesterday as investors were encouraged by the early atmosphere surrounding talks to tackle the nation’s fiscal crunch.
The Dow Jones industrial average gained 207.65 points, or 1.65 per cent, at 12,795.96. The Standard & Poor’s 500 Index was up 27.01 points, or 1.99 per cent, at 1,386.89. The Nasdaq Composite Index was up 62.94 points, or 2.21 per cent, at 2,916.07.
Stronger-than-expected earnings from Lowe’s and Tyson Foods, as well as encouraging housing data, also contributed to the market’s advance. Tyson and Lowe’s were the top two percentage gainers on the S&P 500.
The S&P 500 is up more than two per cent in the last two sessions as rhetoric from legislators over the weekend suggests a deal could be reached to stave off the looming “fiscal cliff”, a series of tax and spending changes that will begin to take effect in the new year. The two sides are still far apart in negotiations, however.
The benchmark S&P index had fallen 5.3 per cent between Election Day and Friday’s rebound, as investors took the opportunity to sell stocks – including some of the year’s best performers – just in case Washington can not come to an agreement and taxes on dividends and capital gains rise in 2013.
“Everyone is quietly breathing a sigh of relief, because frankly, we are no longer looking over the edge of a cliff, we are looking at an opportunity to step back and recalibrate,” said Peter Kenny of Knight Capital.
However, the rebound could be a short-lived reprieve from the sharp declines and market volatility could still rise, depending on negotiations.