New York: US stocks rose on Tuesday as news of an alternative stimulus plan from Senate Republicans suggested lawmakers were moving closer to a package that would soften the blow of a deepening recession.
A surprise rise in December pending home sales also buoyed sentiment, while a solid profit from drugmaker Merck offered a rare bit of welcome news in an otherwise gloomy earnings season.
“The fact that we’ve gotten at least a counter-proposal makes it more likely that something will pass,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
“There was some concern that we might not get a (stimulus) bill passed a couple of days ago. That certainly added to the market’s big move at the end of the day.”
Merck shares climbed more than 6% making health-care stocks one of the biggest boosts to both the Dow and the S&P 500. Schering-Plough also posted quarterly results ahead of Wall Street targets, sending its stock up more than 8%.
The Dow Jones industrial average jumped 141.53 points, or 1.78%, to 8,078.36. The Standard & Poor’s 500 Index added 13.07 points, or 1.58%, to 838.51. The Nasdaq Composite Index shot up 21.87 points, or 1.46%, to 1,516.30.
A group of Republican US senators offered a $445 billion alternative plan to boosting the ailing economy, about half of which would be in the form of tax cuts. The plan is an alternative to the $885 billion package crafted by Democrats who control the Senate.
But even with the optimism, there was some unsettling news after the bell as Walt Disney Co, considered a bellwether for consumer spending, posted a 32% slide in quarterly profit, worse than expected. Its stock, a Dow component, slid than 9% to $18.70 after-hours, from a close of $20.62 on the New York Stock Exchange.
Disney’s results could potentially unnerve investors on Wednesday.
In the regular session, technology notched a strong advance for a second straight day as shares of such bellwethers as Microsoft rallied on hopes that government stimulus plans will boost consumer and business spending, offsetting a disappointing outlook from flash memory card maker SanDisk Corp .
Investors saw a glimmer of hope in the battered housing market after pending sales of existing homes rose 6.3% in December, sparking an 8.5% rise in the Dow Jones home construction index.
Bank shares slid, however, due to uncertainty about the Obama administration’s plans to shore up the beleaguered financial sector. JPMorgan, down 4.6% at $24.05, was the top drag on the Dow, followed by American Express, off 5.2% to $16.09.
Bank of America sagged for a fourth straight day, ending 11.8% lower at $5.30 on the New York Stock Exchange. The Obama administration is due to make an announcement about its bank plan next week.