Stocks move higher on hopes for budget deal

Joseph Mastrolia, left, a trader with Barclays, and

Joseph Mastrolia, left, a trader with Barclays, and Chris Casaliggi, Euronext floor manager, begin early trading on the floor of the New York Stock Exchange recently. A high-ranking member of the U.S. Senate unnerved investors and sent Wall Street lower on Tuesday, Nov. 27, after expressing frustration over the budget impasse. (Nov. 20, 2012) (Credit: AP)

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Stocks gained on signs that lawmakers are edging toward a deal that would help the U.S. avoid the "fiscal cliff."

Indexes shrugged off an early loss and rose in afternoon trading Wednesday. The Dow Jones industrial average closed up 106.98 points at 12,985.11.

The Standard & Poor's 500 was up 0.79 percent at 1,409.93. The Nasdaq composite rose 0.81 percent to 2,991.78.

Huge tax increases and spending cuts will come into effect Jan. 1 if no deal on the U.S. budget is reached. Economists say the measures could push the country back into recession. President Barack Obama said he believed both parties can reach a "framework" on a debt-cutting deal before Christmas, while House Speaker John Boehner told reporters that he was optimistic a deal could be reached, according to news outlets including CNBC.

Craig Johnson, a Minneapolis-based technical market strategist at Piper Jaffray, said lawmakers realize that there is too much at stake to allow the deadline to pass. "I don't think that anybody in Washington is going to do something so draconian, or so negative, that we're going to trigger a recession," Johnson said. "There will be some compromise."

Concern that the U.S. will go over the fiscal "cliff" has weighed on stocks since the Nov. 6 elections.-- AP

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