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Perceived progress on 'fiscal cliff' drives Wall Street stocks higher

December 18, 2012|By Alana Semuels

Just when you thought the world was ending, things are looking up on Wall Street. Traders pushed stocks higher Tuesday, buoyed by optimism about a deal to resolve the "fiscal cliff" and an upgrade to Greece's credit rating, putting the S&P on track for its strongest two-day run in weeks.

At 11:45 a.m. PST, the Dow Jones industrial average rose 0.69%, to 13,326.58, while the Nasdaq composite inched up 1.17% to 3,045.77. The S&P 500 rose 0.86% to 1,442.75, the highest it has been in a month.

"The market is perceiving progress on the fiscal-cliff front," said Todd Salamone, senior vice president of research at Schaeffer's Investment. "Even though Plan B from [House Speaker John A.] Boehner is vague, the fact that they’re seeing counter offers is perceived as a step in the right direction."

Also Tuesday, Standard & Poor's said that the "strong determination" of European governments to keep Greece in the Eurozone allowed it to move the country's credit rating from selective default to B-. That allowed investors to feel some optimism on another concern that's kept the market muted this year -- instability in Europe’s financial system.

Should good economic news continue, Salamone said, the market could continue to rise in the months ahead. 

"It's a market that is ripe for a rally," he said. "There's a lot of pent-up demand."

Last year in December, the market tanked as the government continued to struggle with budget issues. But once those issues were resolved -- albeit temporarily -- the S&P rallied 25%. It hasn't gone back to last year's lows.

Banks were among the strongest stocks Tuesday. At around noon PST, Goldman Sachs was up 2.84% to 127.02, while Morgan Stanley rose 2.5% to 19. Bank of America rose 1.45% to 11.16.

One of the few low spots in the market were shares of gun makers. Shares of companies such as Smith & Wesson and Sturm, Ruger & Co. continued to fall as stores pulled certain types of guns from their shelves in the wake of the Newtown, Conn., shootings.

At one point, Smith & Wesson fell 10% to 7.74, while Sturm, Ruger fell 8% to $40.42.

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