Fiscal cliff talks lift stocks

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NEW YORK (CNNMoney) -- U.S. stocks advanced Thursday, as markets around the world react positively to signs that Washington might be moving toward a deal on the fiscal cliff.

The Dow Jones industrial average gained 43 points, or 0.3%, while the S&P 500 added 0.5% and the Nasdaq gained 0.6%.

Lawmakers and the White House have been in talks for months to try and avoid the slew of year end tax increases and spending cuts known as the fiscal cliff .

Treasury Secretary Tim Geithner will be on Capitol Hill Thursday for meetings with Congressional leaders Thursday, while President Obama is slated to have lunch with defeated Republican presidential nominee Mitt Romney.

"Investors may be beginning to price in an increased likelihood of a fiscal cliff resolution before year end, as President Obama leverages social media and his reelection to pressure Republicans to accept either a compromise or the blame for falling off the cliff," said Sam Stovall, chief equity strategist at S&P Capital IQ.

Oil prices were also up on optimism over a deal, with crude prices gaining more than 2% to $88.60 a barrel.

Data showing an improving economy also provided a boost on Wall Street.

The government said U.S. gross domestic product grew at a 2.7% annual rate in the third quarter. Separately, weekly claims for unemployment benefits fell 23,000 to 393,000.

Pending home sales jumped 5.2% in October from a year earlier, according to the National Association of Realtors. Outside of a few spikes driven by the $8,000 home buyer's tax credit in 2009 and 2010, NAR said pending home sales are at the highest level since March 2007.

Related: Fear & Greed Index sitting in neutral

Investors also sifted through a batch of quarterly results. Grocery chain Kroger (KR, Fortune 500) shares rose sharply after the company posted better-than-expected results for the third quarter and also lifted its outlook for the year.

Shares of troubled bookseller Barnes & Noble (BKS, Fortune 500) slipped after the company posted a loss of 4 cents per share and a revenue decline of 0.4%.

Shares of Tiffany (TIF) tumbled after the luxury retailer reported third-quarter earnings and sales that missed estimates. The company cut its forecast for the full-year.

Many major retailers also reported same-store sales for November, including the start of the holiday shopping season over the Black Friday weekend, and the results were mostly disappointing.

Kohl's (KSS, Fortune 500)sales at stores open at least a year sank 5.6%, sending the retailer's stock down 9%.

Same-store sales at Gap (GPS, Fortune 500) improved, but the increase was less than expected.

Macy's (M, Fortune 500) shares dropped as November same-store sales unexpectedly slipped, and shares of Target (TGT, Fortune 500) were under pressure after the retailer reported a 0.1% decline in sales.

Research in Motion (RIMM) got a big boost from a Goldman Sachs upgrade. The BlackBerry maker also announced updates to its so-called developer ecosystem as the company works to drum up enthusiasm for the BlackBerry 10.

Meanwhile, world markets took their cues from the United States.

Asian exchanges gained, with the Nikkei adding 1.0% and Hong Kong's Hang Seng closing 1.1% higher.

China's marquee index, the Shanghai Composite, lagged its rivals and posted a fresh multi-year low. The index lost 0.5%, and remains well below the psychologically important 2,000 point mark.

Markets in Europe also capitalized on the fiscal talks momentum, gaining between 0.7% and 0.9% in afternoon trading.

Two European sentiment reports injected life into the ailing eurozone economy. The European Commission's reading on economic sentiment pushed higher in November, after two months of deceleration. And the EC's business climate indicator also edged higher.

Related: Why Italian bonds are rallying

Also in Europe, Italy's borrowing costs continued to fall as investors bet the European Central Bank will backstop the nation's massive bond market. Yields on Italian 10-year bonds fell to 4.47%, near the lowest levels since the euro crisis erupted in 2011, following two strong auctions.

Meanwhile, The dollar lost ground against the euro and the British pound, but strengthened against the Japanese yen.

Gold prices for December delivery also edged higher, rising 0.5% to $1,725.40 an ounce.

The price on the 10-year Treasury fell, pushing the yield up to 1.63% from 1.62% late Wednesday.

First Published: November 29, 2012: 9:42 AM ET

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