Stocks turn higher after deficit report

NEW YORK?? Stocks erased initial losses and turned positive on Wednesday after the Congressional Budget Office said the recent budget deal will slice projected budget deficits nearly in half over the next 10 years.

The Dow Jones industrial average gained 21.42 points, or 0.19 percent, to 11,198.18. The Standard & Poor's 500 Index rose 2.75 points, or 0.24 percent, to 1,165.10. The Nasdaq Composite Index added 2.84 points, or 0.12 percent, to 2,448.90.

The federal budget deficit will hit $1.28 trillion this year, down slightly from the previous two years, with even bigger savings to come over the next decade, according to congressional projections released Wednesday.

The nonpartisan Congressional Budget Office says budget deficits will be reduced by a total $3.3 trillion over the next decade, largely because of the deficit reduction package passed by Congress earlier this month.

Stocks were also supported a bit by a government report before the open that showed companies placed more orders for aircraft, automobiles and other durable goods rose in July. Orders for longer-lasting goods rose 4 percent in July, the biggest increase since March. Orders had dropped 1.3 percent in June.

Hopes that Fed Chairman Ben Bernanke would announce new stimulus for a struggling U.S. economy fueled a 3 percent rally in stocks on Tuesday.

Bernanke speaks to a central bank conference on Friday in Jackson Hole, Wyoming. Analysts were divided on how much scope the Fed has for further stimulus.

Concerns about the economy's strength and the euro zone's sovereign debt crisis have sparked sharp volatility in the past two weeks, and the magnitude of Tuesday's rally echoed the steep moves.

Story: U.S. durable goods orders up more than expected

Applied Materials Inc is scheduled to report quarterly results later Wednesday.

Bank of America Corp could remain in focus a day after the Dow component fell to 2-1/2-year lows on fears it may have to raise massive amounts of capital. The stock rose slightly in early trrading.

Delta Air Lines Inc is expected to order 100 Boeing Co extended-range 737 planes to replace older aircraft, sources said.

U.S. stocks shot higher Tuesday on hopes for Fed action, giving investors hope that a four-week rout was ending. Technology and other growth stocks drove most of the gains, with the Nasdaq rising more than 4 percent.

Reuters contributed to this report.

Source: http://www.msnbc.msn.com/id/44254621/ns/business/

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