“U.S. stocks rallied on Tuesday, buoyed by optimism that negotiations in Washington would lead to a deal to prevent deep spending cuts and tax hikes early next year,” Polya Lesova and Kate Gibson report for MarketWatch. “‘The markets are holding out hope this is all a big bluff,’ Ethan Harris, co-head of global economics research at Bank of America, said of the back-and-forth on Capitol Hill that has not yet resulted in an agreement.”

“The mood was buoyed by a report in The Wall Street Journal that budget negotiations between the White House and House Speaker John Boehner have made steady progress in recent days,” Lesova and Gibson report. “Addressing the U.S. House of Representatives Tuesday, Boehner said he was “hopeful” an accord would be reached. The Ohio Republican also said his party was waiting for President Barack Obama to outline specific spending cuts.”

“‘It’ll probably go to the last second, and there’s a decent chance we go over the cliff, and it will be spring before this is resolved. There is a high risk Obama and Boehner agree in principle to a deal and Congress doesn’t approve it,’ said Harris. The technology sector led the market higher, with Apple Inc. and Texas Instruments Inc. posting particularly strong gains,” Lesova and Gibson report. “Apple’s shares gained [over 3%]. ISI Group cited China Unicom’s announcement of more than 300,000 preorders for the iPhone 5 set to go on sale Friday. China Unicom is China’s second-largest wireless carrier.”

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