Wall Street welcomes tax-cut deal

"Sentiment is being boosted by yesterday's late-day preliminary agreement in the US to extend tax cuts to all Americans," said analysts at Charles Schwab, adding that it would "help consumers and businesses plan for the future."

The Dow Jones Industrial Average rose 71.52 points (0.63 per cent) to 11,433.71 by 1500 GMT, while the S&P 500 index, a broader measure of the market, gained 8.37 points (0.68 per cent) to 1,231.49.

The tech-rich Nasdaq climbed 17.68 points (0.70 per cent) to 2,613.11.

Obama and his Republican foes announced late Monday a decision to extend tax breaks for all income brackets, including the wealthiest Americans, in an 11th-hour deal aimed at averting a big tax hike on January 1 amid a fragile economic recovery.

In exchange for the extension of the tax cuts introduced under his Republican predecessor George W. Bush, which Obama had fought against for the wealthiest Americans, the Democratic president obtained a 13-month extension of unemployment benefits.

"The tax deal reached by the Obama administration and congressional Republicans will be good for the economy next year. The proposed temporary tax cuts and spending increases will provide a substantial boost to growth in 2011," said analyst Mark Zandi of Moody's Analytics.

On Monday, stocks closed mixed as traders weighed remarks by Federal Reserve boss Ben Bernanke signaling the central bank was ready to introduce new stimulus steps to boost the fragile recovery.

Focusing on stocks, Citigroup shares jumped 2.8 per cent after the US government sold its remaining common shares in the bank acquired in a massive taxpayer-funded bailout after the 2008 Lehman Brothers bankruptcy triggered a global financial crisis.

Google stocks continued to advance, rising 2.1 per cent, a day after the Internet search engine giant plunged into the hot e-book market.

On the down side, shares of the diversified manufacturing giant 3M slipped 1.2 per cent despite the company's boost of earnings guidance for 2011.

The US bond market declined.

The yield on the 10-year Treasury bond rose to 3.06 per cent from 2.94 per cent on Monday, while that of the 30-year bond jumped to 4.34 per cent from 4.25 per cent. Bond prices and yields move in opposite directions.