NEW YORK – The compromise backed by President Barack Obama and Republican leaders on extending tax cuts for two years is lifting stocks but crushing bonds Wednesday.
Investors expect the tax-cut deal to boost economic growth but also widen the budget deficit. Estimates of the plan's cost range as high as $900 billion over the next few years.
Treasury prices are dropping in early Wednesday trading, sending their yields higher for a second day. The yield on the 10-year Treasury note rose to 3.22 percent, the highest level since June 21.
That means higher borrowing costs for the U.S. government when the Treasury auctions off $21 billion in 10-year notes later Wednesday.
Stocks opened higher. The Dow Jones industrial average rose 15 points, or 0.1 percent, to 11,374.07. The Standard & Poor's 500 index rose 3, or 0.2 percent, to 1,226.73. The Nasdaq composite index rose 8.5, or 0.3, to 2,607.00.
The dollar rose 0.3 percent against an index of six other currencies.
The tax cut deal, which would also extend unemployment benefits, had sent stock prices higher for much of Tuesday but the rally faded by late afternoon. The Standard & Poor's 500 index closed within two points of its 2010 high reached on Nov. 5.
Treasurys got crushed on Tuesday as traders expected the tax plan to cause ballooning budget deficits. The yield on the benchmark 10-year Treasury note jumped to 3.13 percent from 2.93 percent late Monday.
In corporate news, Home Depot Inc. rose 0.7 percent after the retailer raised its earnings forecast for the second time in two months. Fortune Brands Inc. rose 1.5 percent after the company announced plans to split into three parts. Fortune will keep its liquor business led by Jim Beam bourbon while shedding the units that make Titleist golf balls, Moen faucets and Master Locks.