Progress in talks buoys markets

NEW YORK - The stock market showed signs of life Tuesday given hopeful signs of progress in budget talks in Washington. The Standard & Poor's 500 had its biggest gain this month.

The Dow gained 78.56 points to 13,248.44, after climbing as much as 137 points earlier. The Standard & Poor's 500 index finished up 9.29 points at 1,427.84. Both the Dow and the S&P have risen for five straight days.

The Nasdaq composite ended up 35.34 points at 3,022.30.

The Wall Street Journal reported that budget negotiations between the White House and Republican House Speaker John A. Boehner to avoid the fiscal cliff had "progressed steadily" in recent days. That reinvigorated talks that appeared to have stalled, the paper reported, citing people close to the process.

Stock markets stayed higher even after Boehner said midday Tuesday that President Obama was slow-walking talks to avoid the fiscal cliff, and hadn't outlined spending cuts he's willing to support as part of a compromise. Senate Majority Leader Harry Reid said Tuesday afternoon it would be "extremely difficult" to pass legislation to address the cliff before Christmas, but added there was still a chance it could be done.

Stocks are holding on to their gains for the year. The Dow Jones is up 8.4 percent since the start of the year, and the S&P 500 has gained 13.5 percent.

The Federal Reserve is expected to announce a new bond-buying plan to support the U.S. economy with the goal of further reducing long-term interest rates and encouraging borrowing by companies and individuals. Once its two-day policy meeting ends Wednesday, the Fed is likely to say it will start buying more long-term Treasurys to replace a program that expires at year's end.

Investors were also encouraged by a report that showed an index of German investor optimism rose more than expected in December, suggesting market professionals think Europe's largest economy will avoid an outright recession.

The yield on the 10-year Treasury note rose 4 basis points to 1.66 percent.

In other big stock moves:

Urban Outfitters of Philadelphia rose $1.65, or 4.5 percent, to $38.65 after the company reported rising sales. The retailer, which operates Anthropologie, Free People, and its namesake stores, reported its third-quarter results in November, which fell just short of market expectations.

Dollar General fell $3.63, or 7.8 percent, to $42.94 after the company said that although its sales over the Thanksgiving weekend and the start of the holiday shopping season were encouraging, it remained cautious about the rest of the year, noting that consumer spending was still tight.