Market Review By TraderXP:
Gold rebounded from the lowest price in more than three months, as some investors have finished betting on the decline, with U.S. lawmakers seeking agreement on a new budget, to prevent automatic spending cuts and tax increases.
"You get a kneejerk reaction in which short positions are closed," said David Lennox, an analyst at Fat Prophets in Sydney, referring to the end of a bet on a decline. "You would not want to give up gold at around $ 1,690 an ounce, up, the risk is much higher than thedownside risk."
Market News
WallStreet rate rises on the economy, it looks like the past "cliff"
U.S. stocks rallied on strong volume on Tuesday, capping off the best two-day run S & P 500 in a month, in the belief that a deal could be struck in Washington to avoid painful spending cuts and tax increases, which could damage the economy.
Banks, energy and technology - sectors that would be useful in times of economic growth - led gains as investors remain confident that lawmakers will come to an agreement to avoid the so-called "financial cliff" period at the end of this year.
PHLX oil service sector index jumped by 3.1 percent, with eight of its 15 components up to 3 percent or more.
"The notion that the economy is getting better, and it's always good for energy demand," said Shawn Hackett, president of Hackett Advisors in financial Boynton Beach, Florida.
Hackett said the United States will avoid "any rock means" for the economy, which allows investors to focus on growth.
The most recent proposal by President Barack Obama, Republicans in the ongoing negotiations of the budget to make concessions on taxes and social spending programs. House Speaker John Boehner said that the proposal "is not there", although he still hopes the agreement. Senate Democrats, however, expressed concern over the reduction of social security.
Financial stocks shot higher as traders bet on increased demand for loansand steepness of the yield curve. U.S. government debt sold on Tuesday, with the yield on 10-year U.S. Treasury bond briefly hit the highest level since late October.
S & P financial sector added 1.5percent.
Index Dow Jones Industrial Average rose 115.57 points, or 0.87 percent, to 13,350.96 at the close. S & P 500 rose 16.43 points, or 1.15 percent, to 1,446.79. Nasdaq Composite added 43.93 points, or 1.46 percent, to 3,054.53.
It was the first back to back gain S & P 500 by more than 1 percent from the end of July.
Stocks of small companies better market, with the Russell 2000 to 1.5 percent.
Stocks sank firearms manufacturers since the school shooting in Newtown, Conn., on Friday that killed 20 children and six adults.
Smith and Wesson fell 10 percent to $ 7.79 for its biggest daily volume, although it still accounts for about 77 percent this year. Sturm Ruger & Co. slid 7.7 percent to $ 40.60 Tuesday.
Private equity firm Cerberus Capital Management said it will sell gunsmith Liberty Group, whose Wheel AR-15 rifles were used in the massacre in Connecticut. Dick Sporting Goods has suspended the sale of certain semi-automatic rifles in their stores across the country.
Technology stocks rose, led by Apple, up 2.9 percent at $ 533.90, losing nearly 13 percent in the past two weeks. S & P Information Technology Index rose 1.7 percent.
Arbitron Inc rose 23.6 percent to $ 47.03 after Nielsen Holdings NV agreed to buy the media and market research firm in a deal worth $ 1.26 billion. Nielsen rose 4.4 percent to $ 30.92.
About 7.4 billion shares changed hands on the New York Stock Exchange, NYSE, Nasdaq and MKT, more than the daily average this year of about 6.5 billion shares.
On the NYSE, about 14 issues rose for every five that fell, while on the Nasdaq, advanced outsiders outnumbered in a ratio of about 5 to 2. Reuters.com
Currencies
Eurooutperforms specialties, the yen is still constrained
The euro hovered at multi-month highs against the dollar and the yen on Wednesday, extending recent gains, as signs of progress in negotiations with the U.S. fiscal strengthened demand for riskier assets.
The Australian dollar, however, barelybudged partly because currency speculators have already holds the record long positions in currencies.
The euro reached $ 1.3224, not far off overnight high of $ 1.3238 - a level not seen since May. Against the yen, it brought 111.35, then scaled a 14-month peak of 111.48, close to the maximum of 111.57 in October 2011.
"We believe that by year-end position compression is the main driving force of the wide lead euro at the moment, especially since both estimates and positioning begin to appear stretched on the high beta currencies," BNP Paribas analysts wrote in a note.
"If the U.S. financial negotiations rocks take an unexpected turn for the worse, we believe that the EUR / USD 1.3300 will meet our year-end goal."
Hopes are high that the deal will be concluded between President Barack Obama and House Speaker John Boehner, to prevent the economy from going "financial cliff. Both sides have to make compromises in the last days and the White House remained confident in the agreement.
The dollar managed to hold its ground against the yen broadly weak, which remained alone, as the markets are on the Bank of Japan to ease monetary policy on Thursday.
The Bank of Japan will start a two-day meeting on Wednesday and is under strong political pressure to expand its asset purchase program aggressively grabbing the third largest economy in the world out of its fourth recession since 2000.
Dollar rate was 84.19 yen, not far off a 20-month high of 84.55 set on Monday.
Markets also will be watching onJapan trade relations in figures 2350 GMT, which could add to the case for boldpolicy action by the Bank of Japan. Exporting countries have suffered from falling out of a diplomatic row with China and weak global demand.
Prominent among the major currencies was perhaps the underperformance of the Australian dollar, which slipped on the dollar, despite the market conditions, the "risk-on.
Traders said further growth was limited to Aussie given that many speculators have already bullish positions and need a fresh impulse to put on another.
The Australian dollar was at $ 1.0532, having stalled just below $ 1.0600, as the rally from the November low of $ 1.0287 last week ran out of steam.
It was still a long way to 2012 peak of $ 1.0857 and then float high of $ 1.1081 set in mid-2011. Reuters.com
