Wall Street traded sharply higher Tuesday after unexpectedly cheery data out of Europe and as the Federal Reserve was set to begin its two-day policy meeting.
The Standard & Poor’s 500-stock index added 1 percent in morning trading, while the Dow Jones industrial average rose 0.9 percent and the Nasdaq composite index was up 1.5 percent.
The stock market has entered a traditionally quiet period heading into the end of the year, with thinner trading volumes and fewer large fluctuations likely.
Though the pace of talks quickened in Washington to avert impending tax increases and spending cuts, senior politicians on both sides cautioned that an agreement on all the outstanding issues remained uncertain.
The lack of progress in negotiations about the “fiscal cliff” has kept investors from making aggressive bets in recent weeks, though most expect a deal will eventually be reached.
In Germany, analyst and investor sentiment rose sharply in December, entering positive territory for the first time since May, a leading survey showed. The data helped drive European shares higher. The DAX in Frankfurt was up 0.6 percent in afternoon trading, while the FTSE 100 in London gained 0.2 percent.
“We’ve been getting a lot of the beginning of our day from seeing what Europe has been doing, and I think that’s going to hold true today,” said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
The Fed began its two-day Federal Open Market Committee meeting on Tuesday. The central bank was expected to announce a new round of Treasury securities purchases on Wednesday, according to a Reuters survey of analysts. The program would replace its so-called Operation Twist stimulus effort, which expires at the end of the year.
The Treasury Department sold its remaining stake in the American International Group, bringing an end to a government ownership role about four years after a $182 billion bailout. A.I.G.'s shares were up 4 percent in morning trading.
Two firms raised their price targets for Urban Outfitters, sending the retailer’s shares up 6 percent.
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