Optimism grows on Wall Street

Optimism grows on Wall Street

Stocks rose on Wall Street as investors were encouraged by signs of progress in budget talks in Washington.

Just two weeks remain before tax increases and government spending cuts take effect if no deal is reached.

The Dow Jones industrial average rose 100.38 points, or 0.8%, to 13,235.39, its biggest gain this month.

The Standard & Poor's 500 index climbed 16.78 points to 1,430.36 and the Nasdaq composite index rose 39.27 points to 3,010.60.

Marc Chaikin, CEO of the Philadelphia-based market research firm Chaikin Analytics, said investors became more hopeful for a resolution in the budget talks after House speaker John Boehner made an offer to increase tax rates on high-income Americans.

"The fiscal cliff is obviously foremost on everyone's mind," Mr Chaikin said.

Banks were among the best-performing stocks. Citigroup gained $1.55, 4.1 %, to $39.15 after Raymond James raised its target price on the stock to $52 from $44.

In a note to clients, the brokerage reaffirmed its "Strong Buy" rating, citing the "improving fundamental outlook." Bank of America also gained 42 cents, or 4 %, to $11.

Investors are currently favouring financial stocks over technology stocks, said Ben Schwarz, chief market strategist at Lightspeed Financial.

"The banks are ripping today," he said. "People are looking for stability and the tech sector hasn't given them any."

Financial companies make up the best performing industry group in the S&P 500 this year, according to FactSet data. The group, which includes banks such as Wells Fargo & Co. and insurers such as Travelers, has gained 25% this year.

Apple rose $9.04, or 1.8%, to $518.83 after the company said it sold more than two million iPhone 5s in China in their first three days of availability, setting a record for that market.

The technology giant's stock has fallen 26% since it closed at a record 702.10 dollars in September and is trading close to its lowest since February.

In Washington, there appeared to be movement in long-stalled budget talks aimed at avoiding tax increases and government spending cuts set to take effect January 1, which are known as the "fiscal cliff". The combination could lead to a recession.

Indexes opened higher following the news that Mr Boehner, a Republican, offered one trillion dollars in higher tax revenue over 10 years and an increase on the top tax rate for people making one million dollars a year, to 39.6% from 35%.

The market moved higher still after news crossed shortly before noon that Boehner went to the White House to meet President Barack Obama.

Wall Street has been relatively calm in recent weeks, but David Kelly, chief global strategist for JP Morgan Funds, said that by Friday the market will be "squarely focused on what is or is not happening in Washington".

He suggested in a note to clients that the markets will not have "priced in" any outcome, "setting the stage for a market rally with an agreement and a slump with stalemate".

Clearwire slid 46 cents to $2.91, after Sprint announced terms of its buyout deal for the wireless internet access company. Sprint's price of $2.97 per share was below Clearwire's closing stock price on Friday.

Japanese stocks rose after the country's Liberal Democratic Party regained power following a landslide election victory.

Brian Singer, partner at William Blair, a Chicago-based asset management firm, said investors were encouraged by the outcome, which gave the conservative party overwhelming control of Parliament.

The note on the 10-year Treasury bond rose 7 basis points to 1.78%.

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