Benchmarks moved higher for the second consecutive day banking on optimism that Congress will find a solution to the Fiscal Cliff issue before January 1. The S&P 500 climbed to its highest level since October 18. Investor sentiment received a further boost after rating agency Standard & Poor’s increased Greece’s credit rating. The financial and the energy sectors were the major gainers among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) gained 0.9% to close the day at 13,350.96. The Standard & Poor 500 (S&P 500) jumped 1.2% to finish yesterday’s trading session at 1,446.79. The tech-laden Nasdaq Composite Index surged 1.5% to end at 3,054.53. The fear-gauge CBOE Volatility Index (VIX) shed 4.7% to settle at 15.57. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 7.4 billion shares, significantly higher than the daily average of 6.5 billion shares. Advancing stocks easily outpaced decliners on the NYSE; as for 72% stocks that rose, only 26% stocks moved lower.
The blue-chip index posted its biggest one-day advance in nearly a month. The Dow Jones is on its way to closing in the green for the fourth consecutive year. The S&P 500, Dow Jones and Nasdaq have gained 15%, 9% and 17%, respectively, in 2012.
John Boehner said he remained hopeful about finding a solution to the impending Fiscal Cliff. However, he claimed he was still waiting for President Obama to deliver a balanced plan to cut deficit. President Obama’s current offer for $1.3 trillion in tax increases for the next ten years and $850 billion in spending cuts are not considered to be enough by Boehner. However, according to the White House, President Obama is halfway through to match Boehner’s plan. The Fiscal Cliff is slated to take effect in less than two weeks and is projected to bring about another recession if Congress fails to reach a deal to avert it.
John Boehner proposed to raise $1 trillion as tax revenue in a decade. His proposal also states that people earning $1 million per year will have to pay 39.6% of their tax as opposed to the current 35%. Boehner said: “We all know that every income tax filer in America is going to pay higher rates come January the 1st unless Congress acts…It's important that we protect as many American taxpayers as we can.”
White House spokesman Jay Carney said: “The president is willing to continue to work with Republicans to reach a bipartisan solution that averts the fiscal cliff, protects the middle class, helps the economy, and puts our nation on a fiscally sustainable path.” “But he is not willing to accept a deal that doesn't ask enough of the very wealthiest in taxes and instead shifts the burden to the middle class and seniors,” he added.
On the international front, rating agency Standard and Poor’s said it had increased Greece’s credit rating by six notches to B-. The agency said it has increased Greece’s credit rating after its successful debt buyback operation. Greece bought back $39.7 billion worth of debt at reduced prices in its latest debt buyback plan.
The financial sector rallied for the second consecutive day and the Financial Select Sector SPDR (XLF) gained 1.5%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), Goldman Sachs Group, Inc. (NYSE:GS), PNC Financial Services (NYSE:PNC) and Citigroup Inc. (NYSE:C) surged 0.9%, 1.7%, 3.5%, 2.9% and 0.8%, respectively.
The energy sector also had a good run and the Energy Select Sector SPDR (XLE) gained 1.8%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Marathon Oil Corporation (NYSE:MRO), Petroleo Brasileiro Petrobras SA (NYSE:PBR) and Suncor Energy Inc. (NYSE:SU) added 0.8%, 1.3%, 1.9%, 0.5% and 1.6%, respectively.