U.S. stocks rose Wednesday, erasing an earlier loss for the Standard & Poor’s 500 Index, after comments by Speaker of the House John Boehner and President Barack Obama fueled optimism an agreement can be reached in budget talks.
Costco Wholesale Corp. (Nasdaq: COST) advanced 6.3 percent after saying it plans to pay a special dividend. J.C. Penney Co. (NYSE: JCP) rallied 4.6 percent as consumer staples and discretionary stocks posted gains among 10 groups in the S&P 500. Knight Capital Group Inc. (KCG) jumped 15 percent after receiving takeover offers from Getco LLC and Virtu Financial LLC. Cliffs Natural Resources Inc. (CLF) dropped 1.3 percent as commodities declined.
The S&P 500 climbed 0.8 percent to 1,409.93, after erasing a decline of as much as 1 percent. The Dow Jones Industrial Average added 106.98 points, or 0.8 percent, to 12,985.11. About 6.1 billion shares traded hands on U.S. exchanges, in line with the three-month average, according to data compiled by Bloomberg.
Obama “was confident of something being done by the end of the year,” Thomas Garcia, head of equity trading at Santa Fe, N.M.-based Thornburg Investment Management Inc., said in an email. His firm oversees about $80 billion. “This is something that the market is worried about not getting done by year-end, so if they can get it done, it would provide some relief. The market doesn’t like uncertainty.”
Equities reversed declines as Boehner, an Ohio Republican, said he is optimistic lawmakers engaged in budget talks can “avert this crisis sooner rather than later.” He made his remarks to reporters, while saying he continues to oppose the expiration of tax cuts for top earners and Democrats need to get “serious” on budget cuts. Obama said separately at the White House, “My hope is to get this done before Christmas.”
Stocks fell earlier after Erskine Bowles, co-chairman of Obama’s 2010 fiscal commission, said it’s unlikely the president and Congress will reach a deal by the end of this year. The president met with business leaders today, including Goldman Sachs Group Inc. (NYSE: GS) Chief Executive Officer Lloyd Blankfein.
The U.S. economy expanded at a “measured pace” in recent weeks as gains in consumer demand and housing were tempered by a slowdown in manufacturing and the impact of superstorm Sandy, the Federal Reserve said in its Beige Book business survey, which is based on reports from the Fed’s 12 district banks.
The report indicates that Fed policy makers are unlikely to curtail monthly purchases of $40 billion in housing debt to boost the three-year economic expansion. It also bolsters Fed Chairman Ben S. Bernanke’s view that an agreement on reducing long-term federal budget deficits without abrupt tax increases and spending cuts would remove a barrier to growth.
“The market is at the mercy of the fiscal cliff until we get some sort of resolution,” Liz Ann Sonders, the New York- based chief investment strategist at Charles Schwab Corp. (Nasdaq: SCHW), which has $1.9 trillion in client assets, said by phone. “The worst scenario in general, particularly for psychology, would be just a total can kick -- something like, ‘We can’t come up with a solution. We’re just going to kick this thing six months down the road, without giving the market a path between now and then.’”
Costco advanced 6.3 percent for the biggest gain in the S&P 500 to $102.58. The largest U.S. warehouse-club chain said it plans to pay shareholders a special dividend totaling about $3 billion.
J.C. Penney rallied 4.6 percent to $18.32 as consumer stocks rallied. Coach Inc. (NYSE: COH) also gained, rising 4.4 percent to $60.15, as discretionary companies jumped 1.3 percent. Wal-Mart Stores Inc. (NYSE: WMT) added 1.5 percent to $70.56, as staples companies rose 0.9 percent.
Advanced Micro Devices Inc. (NYSE: AMD) rose 4.3 percent to $1.96. Reuters reported that the second-largest maker of personal-computer processors is selling its Austin, Texas, campus to raise cash. The Sunnyvale, Calif.-based company expects to raise as much as $200 million in the sale, Reuters reported, citing an unnamed spokesman.
Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR) surged 27 percent to $36.86 after reporting fourth-quarter earnings that beat projections. Chief Executive Officer Lawrence Blanford has sought to boost sales with a new Keurig machine that makes milk-based drinks. Blanford also developed an espresso maker with Luigi Lavazza SpA that went on sale in time for the holidays.