Stocks: Budget deal hopes prevail

December 19, 2012: 8:51 AM ET
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NEW YORK (CNNMoney)

I think they can... I think they can...

Investors are beginning to believe that politicians in Washington can resolve the fiscal cliff stand-off after weeks of gridlock. U.S. stocks rose Tuesday amid signs that a deal is taking shape, and stock futures were firm early Wednesday.

Fitch ratings agency repeated a warning Wednesday that it may strip the U.S. of its AAA credit rating if Washington is unable to strike a deal soon to avert the fiscal cliff and allow borrowing to rise.

Aside from the fiscal cliff talks, investors got an update on the nascent housing market recovery -- but November didn't bring good news. Ahead of the opening bell, the Census Bureau said housing starts fell 3% in November to an annual rate of 861,000.

Early Wednesday, news broke that UBS (UBS) will have to pay $1.5 billion to settle claims in the U.S., U.K. and Switzerland related to rigging Libor benchmark interest rates. The settlement was widely trailed in media before Wednesday's announcement.

Also, the Treasury Department announced it will exit all of its investment in General Motors (GM) within the next 12-15 months as part of its efforts to wind down its investments in the Troubled Asset Relief Program (TARP). Shares of GM were up 9.7% early Wednesday.

Trading firm Knight Capital (KCG) said it will merge with rival and partial owner Getco, just three weeks after Getco made its offer. Knight Capital stock gained 7.2% in premarket trading.

Related: America's Debt Challenge

In other corporate news Wednesday , firms including FedEx (FDX) and General Mills (GIS) are scheduled to report quarterly results before the opening bell. FedEx is often view as a bellwether for the broader economy due to the nature and global scope of its business.

How Barnes & Noble ships millions of gifts

After the closing bell Tuesday, tech giant Oracle (ORCL) reported quarterly results that beat analysts' forecasts for profits and revenues, which sent shares higher in after-hours trading. The stock was 2.7% higher in premarket trading.

Fear & Greed Index

European markets shrugged off the UBS settlement news and remained higher in afternoon trading.

Most Asian markets ended broadly firmer, though the Shanghai Composite ended close to flat. Japanese stocks continued to lead the way on expectations of new measures to stimulate the economy. The Bank of Japan is expected to announce an increase in its asset-purchase scheme on Thursday.

The dollar was steady against most major currencies, and continued to gain against the yen, which has been hit by the talk of further monetary stimulus.

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