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The Dow Now: Financials Get Boost From New Fiscal Cliff Cheer

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Hewlett-Packard was down on the day.

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MINYANVILLE ORIGINAL Investors received some pre-holiday cheer, with US stocks rising in mid-Monday trading over renewed optimism that a fiscal cliff deal can be reached in time.

Last Friday, House Speaker John Boehner said that he would accept a tax rate increase for Americans with more than $1 million in net annual income, which had been a key Republican roadblock in negotiations with the White House.

"There are risks that [a fiscal cliff deal] is not going to happen but we expect it will get resolved by the end of the year, even if it's an 11 p.m. decision," Yelena Shulyatyeva, US economist at BNP Paribas, told Minyanville.

The Dow Jones Industrial Average (INDEXDJX:.DJI) was up 0.68% to 13,223.99 points as of 12:08 p.m. EST.

Bank of America (NYSE:BAC) was the largest Dow gainer on the day, leaping 2.84% to $10.88 and hitting a new 52-week high in the process. In general, financials appear to have received the biggest boost from fiscal cliff optimism, with JPMorgan (NYSE:JPM) (+1.10%), American Express (NYSE:AXP) (+0.86%), and other sector heavyweights such as Goldman Sachs (NYSE:GS) (+2.56%) and Morgan Stanley (NYSE:MS) (+2.71%) all rising on the day. The bellwether Financial Select Sector SPDR ETF (NYSEARCA:XLF), which tracks all financial stocks in the S&P 500 (INDEXSP:.INX), is up 1.69% to $16.27.

Travelers (NYSE:TRV) also advanced 1.09% to $74.17. Earlier, the stock was upgraded to Top Pick from Outperform by RBC Capital, citing strong margin growth prospects and expectations for further rate increases in 2013. Travelers' price target was also raised to $87 from $85.

Hewlett-Packard (NYSE:HPQ) was the day's biggest loser, sliding 2.31% to $14.41, after some negative comments on the company by Deutsche Bank analyst Chris Whitmore. Whitmore pointed out that HP shares had rallied in recent weeks on speculation that Carl Icahn might acquire a stake in the PC giant and try to break up the company to unlock value. Whitmore thinks that a breakup would actually destroy shareholder value.

"We believe HP is better served remaining whole due to significant cross business unit synergies, branding leverage, corporate overhead leverage and other associated scale advantages," he notes. "Ultimately, we believe two 'mini HPs' would be less competitive and cede market share at a faster rate than the current unified structure and our preliminary [sum of the parts] analysis suggest a breakup would destroy value. As a result, we believe the recent speculation around breaking HP up will dissipate and the associated stock rally resulting from this speculation will fade."

Alcoa (NYSE:AA) also fell 0.57% to $8.69. The stock gained close to 3% last week on strong economic data from China. Nonetheless, with aluminum prices not moving up in tandem, Alcoa is finding it difficult to sustain an extended rally.

Twitter: @sterlingwong
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No positions in stocks mentioned.
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