Tax cut-fuelled stock rally peters out in late-session trading

A moderate stock rally fueled by a compromise between President Obama and Republicans on tax extensions and unemployment benefits petered out in late-session trading, resulting in a narrowly mixed results for major equity indices.

The Dow Jones Industrial Average edged down 3.03 points, or 3.03 percent, to 11,359.16. The S&P 500 edged up 0.63 points, or 0.05 percent, to 1,223.75. The Nasdaq gained 3.57 points, or 0.14 percent, to 2,598.49.

Subject to approval in the House and Senate, the tax cuts enacted by George W. Bush in 2001 and 2003 will be extended for another two years. In exchange, the Republicans acceded to Obama’s demand that long-term unemployment insurance be extended for another thirteen months.

Citigroup Inc. (NYSE: C) surged 3.6 percent after the government said late yesterday it is seeking to
unload its remaining stake in the bank through a public offering. Nicor Inc. (NYSE: GAS) soared 4.34 percent on news that it will be acquired by AGL Resources Inc. (NYSE: AGL).

Bonds fell as traders anticipated a rising budget deficit arising from the tax deals.The yield on the 10-year Treasury note surged to 3.17 percent, its highest level since mid-July.

Gold and oil futures both fell by more than 1 percent.

Stock indices in Europe/UK rose modestly, likely in reaction to the Obama-Republican tax cut agreement, ahead of the Irish Parliament’s scheduled vote on the country’s austerity budget.