Nov 20 (BusinessDesk) – Equities on Wall Street and in Europe advanced as the string of good news on the US housing market continued, while optimism grew that a deal to avoid the so-called fiscal cliff and safeguard the world's largest economy will be reached.
Investors welcomed separate reports showing a surprise gain in US home resales in October and a climb in homebuilder sentiment in November.
"The housing market is continuing to improve. It's probably improving more than most economists were projecting earlier this year," Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, told Reuters.
That is good news at a time when US lawmakers are in talks to prevent automatic tax increases and spending cuts from kicking in on January 1. The mood has been optimistic since discussions began late last week.
“I am confident we can get our fiscal situation dealt with,” President Barack Obama said yesterday at a news conference in Bangkok, according to Bloomberg News.
Indeed, some argue that the failure to reach an agreement that will prevent the fiscal cliff is a price the US economy cannot afford to pay.
Fitch said falling over the fiscal cliff could trigger a second recession and push the nation's jobless rate above 10 percent. The ratings agency said it did not expect Congress to allow the tax and spending cuts to kick in, given their "far-reaching effects."
Still, some are rather safe than sorry. Wal-Mart Stores opted to fast-track its planned dividend into late December from early January. "There are complex fiscal and federal tax rate issues that may not be resolved in the next few weeks, despite the ongoing good faith negotiations between the administration and Congress to resolve details related to the fiscal cliff," Wal-Mart said in a statement.
Earnings also provided good news. Shares of Lowe's Cos gained, last up 6.3 percent, after the company posted quarterly profit that exceeded expectations and lifted its full-year sales forecast.
Meanwhile, Intel said today that Chief Executive Officer Paul Otellini will retire in May.
“They need someone with a strong understanding of the mobile landscape to guide them for the next six to eight years,” Patrick Wang, an analyst at Evercore Partners, told Bloomberg. “They’d be in great shape if they were to add significant mobile expertise to that management team.”
In afternoon trading in New York, the Dow Jones Industrial Average rose 1.39 percent, while the S&P 500 Index gained 1.70 percent and the Nasdaq Composite Index climbed 1.83 percent.
In Europe, the Stoxx 600 Index ended the day with a 2.2 percent advance on the previous close. Stocks in Paris, Frankfurt and London also rose, climbing 2.9 percent, 2.5 percent, and 2.4 percent respectively.
Oil prices rose to the highest level in four weeks amid the increasingly escalating conflict in the Middle East. Crude for January delivery was last up 2.8 percent to US$89.37 a barrel on the New York Mercantile Exchange.