Financial markets closed higher yesterday, buoyed by hopes that a fiscal-cliff deal was imminent.
All major indices closed above the opening bell — and dramatically higher for the year — on a day of relatively light trading.
“The market just wants this resolved and especially resolved in a way where the impact is pushed as far down the road as possible,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
The Dow rose 1.3 percent to 13,104 yesterday, with the S&P 500 up 1.7 percent and the Nasdaq up 2 percent.
Indeed, the S&P closed 13.4 percent higher for the year, compared with the end of 2011, when it was flat. It was the index’s best year since 2009. The Nasdaq rose 15.9 percent for the year.
One reason stocks stayed afloat through yesterday’s trading was the growing view on Wall Street that a deal to prevent massive tax increases and budget cuts was at hand on Capitol Hill.
“Traders understand that this is a stop-gap measure, but they’ll take it,” said Quincy Krosby, a market strategist at Prudential Financial in Newark. “Markets can rally with some growth but not with no growth. For now, they don’t mind kicking the can down the road.”
Wall Street insiders predicted the vote could come as early as today.
One politically wired hedge-fund professional said it was likely House Republicans would approve a compromise after the nation had technically gone off the cliff so they could say they voted to lower taxes.
Others thought the extra taxes withheld from workers’ pay could be refunded without weakening their buying power.
“It’s still impossible to know what the specific details are, but this all makes me hopeful that Congress can at least defuse the ticking time bomb,” said Jack Ablin, chief investment officer at BMO Private Bank. “Just the fact that Congress can agree on something is worth celebration.”