Indexes shrugged off an early loss and rose in afternoon trading Wednesday. The Dow Jones industrial average closed up 106.98 points at 12,985.11. It had been down as much as 112 points in early trading.
The Standard and Poor’s 500 was up 10.99 points at 1,409.93. The Nasdaq composite rose 23.99 points to at 2,991.78.
Huge tax increases and spending cuts will come into effect Jan. 1 if no deal on the U.S. budget is reached. Economists say the measures could push the country back into recession. President Barack Obama said he believed both parties can reach a “framework” on a debt-cutting deal before Christmas, while House Speaker John Boehner told reporters that he was optimistic a deal could be reached, according news outlets including CNBC.
Craig Johnson, a Minneapolis, Minn.-based technical market strategist at Piper Jaffray, said lawmakers realize that there is too much at stake to allow the deadline to pass.
“I don’t think that anybody in Washington is going to do something so draconian, or so negative, that we’re going to trigger a recession,” Johnson said. “There will be some compromise.”
Concern that the U.S. will go over the fiscal “cliff” has weighed on stocks since the Nov. 6 elections returned a divided government to power, with President Obama staying in the White House and Republicans retaining control of the House.