U.S. stocks gain on budget optimism as oil falls on supply data

U.S. stocks rose amid optimism lawmakers will reach a budget agreement before the end of the year to avoid automatic spending cuts and tax increases. Treasuries climbed and the Dollar Index halted its longest slump in more than a year. Oil and gasoline slid on supply data.

The Standard & Poor’s 500 Index added 0.2 percent to 1,409.28 at 4 p.m. in New York after earlier slumping as much as 0.6 percent. Ten-year U.S. note yields lost one basis point to 1.59 percent and the Dollar Index increased 0.2 percent after declining for five days. Spain’s bonds extended losses after the government missed a maximum sales target at a debt sale.

A few dozen Republicans joined a bipartisan call to break the impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for exploration of “all options.” Obama told a business group in Washington that “nobody wants to get this done more than me” and lawmakers probably could solve the budget debate in about a week if Republicans move.

“The President had a more positive tone with regard to a resolution of the fiscal cliff today,” said Rick Fier, director of equity trading at Conifer Securities LLC in New York. His firm oversees $8 billion in assets. “People expected the worst when he gets on the TV and he didn’t come across so negatively so the sellers stopped.”

Banks Rally

Citigroup Inc. surged, and diversified financial firms led gains among 24 industries in the S&P 500, after announcing it will eliminate more than 11,000 jobs and scale back operations in some emerging markets. Bank of America Corp. also rallied. Trading in the two companies led to a surge in trading volume, according to Miller Tabak & Co. chief technical analyst Jonathan Krinsky. Trading of S&P 500 stocks was more than 25 percent higher than the 30-day average, according to data compiled by Bloomberg.

Travelers Cos., the insurer in the Dow Jones Industrial Average, jumped after saying it is resuming share buybacks and projecting that superstorm Sandy will cost the company about $650 million. Plains Exploration & Production Co. and McMoRan Exploration Co. surged as Freeport-McMoRan Copper & Gold Inc. agreed to acquire them for about $9 billion.

Apple Inc. slid and led the S&P 500’s earlier decline amid concern Nokia Oyj is getting a leg up in China. Market researcher IDC said the company’s share in the global tablet market will slip to less than half by 2016.

Two-year Treasury yields decreased less than one basis point to 0.24 percent and 30-year rates were little changed at 2.78 percent. Treasury 10-year yields were in a range of 22 basis points last month, according to data compiled by Bloomberg, the narrowest since April 2007. This month, the gap has been 5.6 basis points, or 0.056 percentage point.