Optimism on ‘cliff’ buoys stocks

Thursday, December 6, 2012

— Stocks closed higher Wednesday, their first gain of the week, as bank shares rose and comments by President Barack Obama made investors optimistic that a quick deal could be made to avoid the “fiscal cliff.”

The fiscal cliff is a combination of automatic spending cuts and tax increases that are set to go into effect in January unless Congress acts before then.

The Dow Jones industrial average rose 82.71 points to end at 13,034.49. It had been up as much as 137. The Standard and Poor’s 500 closed up 2.23 points to 1,409.28. The Nasdaq composite was down 22.99 points to 2,973.70, held back by a slump in Apple.

Rising stocks narrowly outnumbered falling ones on the New York Stock Exchange. Volume was higher than average at 4.1 billion shares.

Citigroup jumped $2.17, or 6.3 percent, to $36.46 after the bank said it plans to eliminate more than 11,000 jobs, or about 4 percent of its work force, to cut expenses and improve efficiency. Insurance company Travelers surged $3.47, or 4.9 percent, to $74 after it announced plans to resume stock buybacks. Travelers temporarily suspended repurchases after Hurricane Sandy while it assessed its exposure to damage claims.

“We can probably solve this in about a week, it’s not that tough,” Obama said in lunchtime remarks to the Business Roundtable in Washington. The comments, made just before noon, helped push the market higher, said Quincy Crosby, a market strategist at Prudential Financial.

Stocks have largely traded sideways for two weeks as investors wait for developments from Washington on crucial budget talks.

Apple was among the decliners, falling $37.05, or 6.4 percent, to $538.79. Stifel Financial analyst Aaron Rakers said the drop was in part due to comments from AT&T Mobility chief executive officer Ralph de La Vega, which suggested that smart-phone activations this quarter were lagging the same period a year ago. The stock has now dropped 23 percent since closing at a record $702.10 in September.

Stocks are still up on the year, after the Federal Reserve extended its bond-buying program in September, offsetting concern that the European debt crisis was set to spread. The Dow has gained 7 percent and S&P 500 has advanced 12 percent.

“The market will hold on to its gains for the year. Given the uncertainty I don’t see any compelling reasons for an increase,” said Brian Gendreau, a market strategist with Cetera Financial Group, a Los Angeles-based broker. “But that could change in a blink. If there’s better-than-expected news from these negotiations, the market could pop.”

A Chinese government pledge to maintain policies intended to strengthen the world’s second-largest economy helped raise optimism about global growth. China’s Shanghai Composite Index jumped 2.9 percent to 2,031.91. Hong Kong’s Hang Seng ended 2.2 percent higher at 22,270.91.

Business, Pages 26 on 12/06/2012