Stocks continued to rally today, with the S&P 500 up 2 percent on the day and more than 3 percent from Friday’s intraday lows. The breadth of the move, with advancing issues outpacing decliners on the NYSE by a 7 1/2-to-1 margin today and volume an even more impressive 14.5-to-1 margin suggests that we’ll see follow-through buying in the coming days.
As was the case last week, politics were at the heart of the move. The gains have occurred on investor optimism that some progress will be made with respect to avoiding the fiscal cliff. And while real progress remains to be seen, the folks in Washington – on both sides of the aisle – understand the ramifications of the more than $600 billion in mandated spending cuts and tax increases would be to push our still-fragile economy back into recession. Such austerity has done nothing to help Spain or Greece, and it would likewise be detrimental to the US economy.