Stocks rise and fall with twists in budget talks
Optimism that a budget deal will be reached in Washington sent stocks modestly higher on Thursday. A pair of economic reports also brightened the mood.
The Dow Jones industrial average rose 36.71 points to close at 13,021.82.
The stock market took a brief turn lower when House Speaker John Boehner, R-Ohio, said little progress was being made in budget talks in Washington. The Dow was up as much as 77 points in morning trading, turned negative as Boehner made his remarks at 11:30 a.m., then slowly recovered in the afternoon.
Investors were encouraged by several positive economic reports, including a higher estimate of third-quarter U.S. economic growth, an increase in home sales and a drop in claims for unemployment benefits.
After meeting with Treasury Secretary Tim Geithner, Boehner said Democrats still have not said which cuts they would accept to government benefit programs, suggesting a final budget deal remains a long way off.
Republicans have said they are open to increasing tax revenues as part of an agreement but only if they are accompanied by significant cuts to spending.
Investors have been closely watching the talks between the White House and Congress over the “fiscal cliff,” a reference to sharp government spending cuts and tax increases scheduled to start Jan. 1 unless a deal is reached to cut the budget deficit. New developments in the talks have whipsawed the market.
“It's a headline-watching market with this fiscal cliff,” said David Brown, chief market strategist of the investment research firm Sabrient Systems.
Brown says the negotiations are likely to cause the stock market to take sudden turns in the weeks ahead.
In other trading, the Standard & Poor's 500 rose 6.02 points to 1,415.95. The Nasdaq composite index gained 20.25 points to 3,012.03.
In the market for government bonds, the yield on the 10-year Treasury note slipped to 1.62 percent from 1.63 percent late Wednesday.