The last full week of trading of the year got off to a great start today, with the Dow Jones Industrial Average (^DJI +2.45%) and the broader S&P 500 (^GSPC +2.92%) up 0.8% and 1.2%, respectively. The ostensible explanation for the optimism that carried stocks higher lies with positive developments in the fiscal cliff jamboree. Financials, which are a bellwether for policy uncertainty and the risk on/ risk off trade, were the best-performing sector, with the S&P 500 Financials index gaining 2.1%.
Fiscal cliff watch: It appears that negotiations to avert the "fiscal cliff" may finally gaining some momentum. Following reports that John Boehner blinked over the weekend, offering to allow tax rates to increase for those earning over $1 million annually, the House speaker met with President Obama today.
With two weeks until the putative Dec. 31 deadline, it's none too soon for lawmakers to be gearing up their efforts. While this bodes well for the odds of an agreement in the just before -- or a little bit after -- the new year rolls around (I think the latter is more likely), it's worth remaining grounded. As PIMCO CIO told CNBC today: "If we avoid the fiscal cliff ... then we [are] still looking at still sluggish growth of 1.5 to 2 percent next year." I'll paraphrase and add that even if we avoid the fiscal cliff, stocks could face an earnings cliff next year.
Click here for our latest fiscal cliff coverage.
The micro view: Bank of America (BAC +3.04%) was the best-performing Dow component today, up 4%. In fact, B of A has led its universal bank peers Citibank (C +5.64%) and JPMorgan Chase (JPM +3.73%) in smashing the broad market this quarter:
In fact, despite some nerve-jangling declines during the second quarter, 2012 has produced a remarkable turnaround in fortunes for this group, particularly B of A:
