Stocks surged, sending the S&P 500 index to its biggest gain in four months, amid optimism lawmakers were moving closer to a deal that would cut the U.S. budget deficit.
The Dow Jones industrial average closed up 202.26 points, or 1.63%, at 12,587.42; the S&P 500 rose 21.29 points, or 1.63%, ending at 1,326.73; and the Nasdaq composite was up 61.41 points, or 2.22%, to 2,826.52. All numbers are preliminary.
Stocks added to an early advance and Treasuries climbed after President Barack Obama endorsed a deficit-cutting proposal by a bipartisan group of senators known as the “Gang of Six.” Earlier gains in equities were triggered by higher-than-estimated results at companies from International Business Machines Corp. to Coca-Cola Co. and Novartis AG.
“It’s a combination of the good corporate earnings and the market is looking for a relief rally from debt-ceiling and deficit negotiations,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion. “Obama’s support reduces the risk there’s no deal by Aug. 2. It shows both sides are working hard to get a deal.”
The S&P 500 erased Monday’s 0.8% slide and rebounded from a three-week low. Technology shares climbed 2.4% as a group, leading gains among all 10 of the index’s main industries.