This Is the Reason the S&P 500 Has Put Together a Big 2-Day Rally


A rally so nice, we'll see it twice! A second day in a row of strong upside on the broad-based S&P 500 comes about thanks to renewed optimism that a fiscal cliff deal will get done. Although details are still rolling in, it appears that both political parties are beginning to budge toward the middle to do what's best for the American public.

In addition, homebuilder sentiment rose for an eighth-straight month and hit levels not seen since 2006. Still, at a level of 47, overall sentiment is still seen as negative, as any reading above 50 is considered positive, proving how far we still have to go to get back on solid footing in the housing sector.

On the day, the S&P 500 finished higher by 16.43 points (1.15%), to end at 1,446.79.

Today was marked by a strong rally across the board in technology stocks. Application delivery networking company F5 Networks , hard-disk drive providerSeagate Technology , and fiber-optic communications maker JDS Uniphase were three standouts that piled onto the fiscal cliff deal optimism bandwagon. These three companies rose 5.1%, 4.7%, and 4.5%, respectively.

As you might imagine, if we go over the fiscal cliff, higher taxes could constrain spending from the individual buyer all the way up the chain to larger enterprises, potentially leading to a significant reduction in spending from big data centers and telecommunication companies. With a deal possibly on the horizon, these three companies have less to worry about.

Not to rain on what was an incredibly positive day for the S&P 500, but Electronic Arts' battleship was sunk on growth concerns by an analyst at Cowen & Co. Shares fell 3.3% as the covering analyst, Doug Creutz, noted that he believes a sizable earnings miss is on the horizon for EA, whose Star Wars: The Old Republic sales trends have been sluggish. However, Creutz isn't completely negative on EA and still expects 20% outperformance on shares over the next 12 months and predicts long-term success for the company. Although I'm not overly tempted today, EA could be an attractive value if it continues to fall.

Does this company still have game?
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Fool contributor Sean Williams but has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of F5 Networks. Motley Fool newsletter services have recommended buying shares of F5 Networks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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