Wall Street rallies on fiscal hopes; Spain hits euro
NEW YORK (Reuters) - U.S. stocks rose on Wednesday after President Barack Obama said a deal to avert the looming fiscal cliff was possible within a week, while the euro slipped after a disappointing Spanish bond auction.
A more than 6 percent drop in tech giant Apple made for the stock's worst day in almost four years and constrained Wall Street's gains. The Nasdaq fared worse than the other indexes as a result.
Investors continued to keenly monitor any progress in talks to avoid the so-called fiscal cliff of year-end tax hikes and spending cuts. Obama said an agreement could be reached in a week if Republicans compromise on taxes.
"Just the idea that we could have some kind of timeline is enough to eliminate some of the concerns," said Todd Schoenberger, managing partner at LandColt Capital in New York
"The fiscal cliff is the headline driver, so anything even slightly positive will move markets."
Both Republicans and Democrats dug in on the talks, urging quick action but still offering no compromises.
Economists say the $600 billion in tax hikes and spending reductions that will start to go into effect at the beginning of next year could send the economy back into recession if politicians don't come to an agreement to avoid it.
The euro fell after hitting a seven-week high against the dollar in early trading, stung by the disappointing Spanish bond sale and weak euro zone economic data. The euro was down at $1.31.
Investors also held off taking aggressive bets ahead of the European Central Bank's policy meeting on Thursday, which will be watched for any signs on next year's policy path.
"The euro is struggling to hold its ground ahead of the European Central Bank interest rate decision amid the negative developments coming out of the region," said David Song, currency analyst at DailyFX in New York.
"The single currency may continue to give back the rebound from the previous month as the fundamental outlook for the euro area deteriorates."
Bond markets also reacted poorly to the auction, with Spanish 10-year yields rising to 5.41 percent after demand for the sale was below expectations.
Euro zone experts still expect Madrid to request a sovereign bailout that would pave the way for the ECB to buy its debt, but doubts have started to creep in again following a drop in tensions and yields in recent weeks.
The Dow Jones industrial average finished up 82.71 points, or 0.64 percent, at 13,034.49. The Standard & Poor's 500 Index gained 2.23 points, or 0.16 percent, to 1,409.28. The Nasdaq Composite Index dropped 22.99 points, or 0.77 percent, to 2,973.70.
Apple was the biggest drag on the Nasdaq, giving up 6.4 percent to $538.79. Analysts cited a variety of factors, including increasing competition in the tablet market.
The FTSEurofirst 300 index closed up 0.3 percent and, the MSCI index of world stocks rose 0.2 percent.
A mixed batch of business and retail data showed euro zone shoppers cut back on spending by the biggest margin in six months in October, while purchasing manager figures pointed to another quarter of recession.
"The economic data pretty much confirmed the (euro zone) economy is still in a very weak state," said Rabobank economist Elwin de Groot.
In the United States, private payrolls processor ADP reported that private-sector employers added 118,000 jobs in November, fewer than expected as Superstorm Sandy took a toll on hiring, though activity in the service sector continued to expand.
Wednesday's other main economic event in Europe came in Britain, where chancellor George Osborne warned that growth will be weaker than expected and that he will have to break a key debt promise.
Britain's economy was now forecast to grow by only 1.2 percent in 2013, down from the 2 percent rate predicted in March.
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