US stocks rallied yesterday after comments from House Speaker John Boehner, the top Republican in Congress, on a possible compromise to avoid the “fiscal cliff” turned the market around.
The S&P 500 rebounded from a 1 per cent decline, gaining more than 20 points from its low after Boehner, an Ohio Republican, said he was optimistic that a budget deal to avoid big spending cuts and tax hikes can be worked out. President Barack Obama said he hoped to get a deal done in the next four weeks.
Whether or not those remarks reflect the reality of negotiations is another story.
“The fiscal cliff is dominating the discussion, and short term, we’re a little bit too optimistic on it being fixed right away,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York.
In expectation of higher dividend tax rates in 2013, companies have been shifting dividends or announcing special payouts to shareholders.
Costco Wholesale Corp, up 6.3 per cent at $102.58, was the S&P 500’s biggest percentage gainer after it became the latest company to announce a special dividend.
The market’s move marked the second straight day where a leading legislator dictated trading action.
The Dow Jones industrial average rose 106.98 points, or 0.83 per cent, to 12,985.11 at the close. The S&P 500 gained 10.99 points, or 0.79 per cent, to 1,409.93. The Nasdaq Composite added 23.99 points, or 0.81 per cent, to close at 2,991.78. The S&P 500 closed above 1,400 for the third session in four – an optimistic sign.