On Wednesday, markets closed slightly higher and the S&P 500 index surged to its highest level since September 2008. A rally in financial stocks coupled with investors' optimism about the extension of Bush-era tax cuts helped the markets turn green. Investors' concerns about the rising interest rate in the Treasury market could not weigh the markets down.
US President Barack Obama said extending tax cuts was in the best interests of the economy. According to some analysts, though the agreement might add to the deficit for two more years, it will boost an economic recovery and fuel job creation. Investors' turned optimistic, as the deal extended the 15% rate on dividends and analysts opine that it would enable companies to raise or issue dividends.
Expectations of an increase in dividends were the driving force behind the financial sector surge. The Financial Select Sector SPDR Fund gained 1.6%. U.S. Bancorp USB rose 3.3% to $25.17 as it reported it would restart dividends in early 2011. Other key financial stocks, such as, MorganStanley MS moved up 3.2%. Bank of America BAC surged 3.7%, Goldman Sachs GS was up 2.8% and JP Morgan JPM increased 2.6%. However, American International Group AIG plunged 3.9% after a report that the US government will sell off $15 billion of its shares early next year.
AMER INTL GRP (AIG): Free Stock Analysis Report
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US BANCORP (USB): Free Stock Analysis Report
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