MarketView for December 17

Summary

The S&P 500 ended at its highest level in almost two months on Monday on rising hopes that negotiations over the "fiscal cliff" were making progress and that a deal would be forthcoming in days.

After weeks of stalemate, President Barack Obama and Republican House Speaker John Boehner met at the White House on Monday, raising hopes that Washington will be able to head off steep tax hikes and spending cuts that threaten the economy.

All of the S&P 500's 10 sectors were higher, led by financials and other growth-oriented sectors. The S&P Financial Index gained 2.1 percent, while shares of Bank of America chalked up a gain of 4 percent to end the day at $11. In a research note Monday, Meredith Whitney Advisory Group shifted to a positive stance on financials and upgraded Bank of America, Citigroup and Discover Financial. Shares of Citigroup rose 4.1 percent at $39.15, while Discover Financial gained 1.6 percent, to close at $40.18.

The S&P consumer discretionary index, up 1.8 percent, was the second-best performing sector. The key concern is that the economy could slide into recession if the tax and spending changes are implemented.

Boehner has edged closer to Obama's position by proposing to extend lower tax rates for everyone who earns less than $1 million. Still, his position remains far from that of President Obama.

The gains, which came on lighter-than-usual volume, ended a two-day losing streak on the S&P 500. The index also had its best daily percentage gain since November 23. Volume was roughly 6.2 billion shares changing hands on the three major equity exchanges, as compared with the year-to-date average daily closing volume of 6.4 billion shares.

In the financial sector, American International Group rose 3 percent to $34.95 on plans to sell as much as $6.5 billion of AIA Group Ltd.

Clearwire agreed to sell the rest of the company to Sprint Nextel for a slightly sweetened $2.2 billion offer just days after minority shareholders criticized the previous bid as too low. Clearwire fell 13.6 percent to close at $2.91, while Sprint’s shares gained 0.2 percent to close at $5.56.

Apple edged up after recent losses, rising 1.8 percent to $518.83, despite reductions in price targets on the shares by two brokerage firms on Monday. The key reason for the gain in share price is a report by Apple indicating that it sold more than 2 million of its new iPhone 5 smartphones in China during the three days after its launch there on Friday. Somewhat surprising is the fact that that the sales number in China did not ease worries about stiffer competition. Apple shares are down more than 25 percent in about three months.

Compuware ended the day up12.9 percent to close at $10.76 after hedge fund Elliott Management offered to buy the business software maker for $2.3 billion and S&P Capital IQ raised the target price and moved it to "hold" from "strong sell."