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Major indices finished in the green following encouraging mergers & acquisitions news. The Dow Jones is just 0.9% short of its all-time high which was achieved in October 2007. President Barack Obama addressed the nation on Tuesday regarding the “spending cuts” which would be implemented from March. Among the top ten S&P 500 industry groups, energy stocks were the biggest gainer while the materials sector was the only loser.

The Dow Jones Industrial Average (DJI) increased 0.4% to close the day at 14,035.67. The S&P 500 increased 0.7% to finish yesterday’s trading session at 1,530.94. The tech-laden Nasdaq Composite Index gained 0.7% to end at 3,213.59. The fear-gauge CBOE Volatility Index (VIX) decreased 1.2% to settle at 12.31. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.9 billion shares, below the daily average of 6.45 billion shares in 2012. Advancing stocks outnumbered the declining stocks. For the 66% that advanced, 31% declined.

Benchmarks finished yesterday’s trading session on a positive note due to optimism created by developments on the mergers & acquisitions front. According to the Wall Street Journal, Office Depot Inc (NYSE:ODP) and OfficeMax incorporated (NYSE:OMX) entered into negotiations for a merger. Shares of Office Depot increased 9.4%, while OfficeMax surged almost 21%. This development comes after Berkshire Hathaway Inc. (NYSE:BRK.A) and a partner decided to buy H.J. Heinz Company (NYSE:HNZ) last week.

On Tuesday, President Barack Obama gave a speech on reducing government spending. The President said that if spending cuts of $1.2 trillion are allowed then it would directly affect investments in energy and medical research, military spending and increase unemployment significantly. According to his State of the Union speech, he intends to bring about investments and increase employment in the country, but a “meat cleaver” approach to these issues could just do the opposite.

The President added if lawmakers are unable to decide by next Friday, “At minimum, Congress should pass a smaller package of spending cuts and tax reforms ... to give them time to work together on a plan that finishes the job of deficit reduction in a sensible way.”

On the earnings front, shares of Express Scripts Holding Company (NASDAQ:ESRX) surged 2.5%. Profits of the company surged 74% year over year; beating the Street’s expectations. The company guided adjusted earnings per share for fiscal 2013 in the range of $4.20 and $4.30. According to Thomson Reuter’s data, 391 companies in S&P 500 have reported their results, among which 70.1% have topped the Street’s estimates.

According to the Centre of European Economic Research (ZEW), the ZEW institute’s index increased to 48.2 in February from previous month’s 31.5. The index beat consensus expectations of 36 points. The German economy contracted by 0.6% in the fourth quarter, increasing fears of further recession. However, economists believe the contraction was just a brief phase and that the economy will bounce back quickly.

The energy sector emerged as the biggest gainer among the S&P 500 industry groups. The Energy Select Sector SPDR (XLE) gained 1.2%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Marathon Oil Corporation (NYSE:MRO), Suncor Energy Inc. (NYSE:SU) and Hess Corp. (NYSE:HES) gained 1.1%, 0.8%, 3.0%, 0.6% and 1.2%, respectively.

The materials sector was the only loser among the S&P 500 industry groups and the Materials Select Sector SPDR (XLB) lost 0.4%. Stocks such as Monsanto Company (NYSE:MON), Ceres Inc (NASDAQ:CERE), FMC Corporation (NYSE:FMC) and Celanese Corporation (NYSE:CE) declined 1.6%, 1.4%, 0.3% and 0.8%, respectively.

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