US STOCKS-Wall Street gains on recovery bets

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* Economy-sensitive cyclicals, small caps gain
* Pfizer, Merck rise on supply deals for COVID-19 drugs
* Jobless claims decline, consumer spending drops
* Indexes up: Dow 0.87%, S&P 0.62%, Nasdaq 0.23%

(Updates to midafternoon, changes dateline, byline)
NEW YORK, Dec 23 (Reuters) - Wall Street advanced on
Wednesday as a pending stimulus deal and falling jobless claims
prompted investors to bet on an economic recovery from the
global health crisis.
All three major indexes were higher, with the blue-chip Dow
and small caps leading the gains.
Economically vulnerable cyclical stocks, which were battered
by mandated shutdowns and stand to benefit most from economic
recovery, were outperforming.
The rotation into cyclicals reflects a growing confidence in
recovery from the pandemic recession, and began in fits and
starts after promising late-stage vaccine data was released in
early November.
"A lot of names that have lagged all year because they were
handicapped by COVID tend to do better as investors focus on
reopening the economy," said Joseph Sroka, chief investment
officer at NovaPoint in Atlanta. "As we get good news on
vaccines, those names get a boost."
The possibility of a year-end shutdown of the U.S.
government, not to mention the lack of new fiscal stimulus,
raised its head after President Donald Trump threatened to veto
a $2.3 trillion funding package, which also includes a
long-awaited $892 billion pandemic relief deal. A Brexit trade deal between Britain and the European Union
appeared more likely after a senior European diplomat told
Reuters that an agreement could be imminent. A raft of mixed economic data showed a welcome decrease in
jobless claims and an uptick in new orders for durable goods,
but also a pullback in consumer spending, dropping personal
income and fading sentiment as the holiday shopping season nears
its end amid a resurgent pandemic. But languid inflation data provided further assurance that
the U.S. Federal Reserve will maintain its accommodative
monetary policy at least until 2024.
The Dow Jones Industrial Average .DJI rose 259.81 points,
or 0.87%, to 30,275.32, the S&P 500 .SPX gained 22.89 points,
or 0.62%, to 3,710.15 and the Nasdaq Composite .IXIC added
29.19 points, or 0.23%, to 12,837.11.
Of the 11 major sectors in the S&P 500, all but real estate
.SPLRCR tech .SPLRCT were in the black.
Drugmaker Pfizer Inc PFE.N rose 2.1% following a deal with
the United States to supply 100 million additional doses of its
COVID-19 vaccine by July. Merck & Co Inc MRK.N agreed to supply the U.S. government
with up to 100,000 doses of its COVID-19 treatment, sending its
stock up 1.0%. Supernus Pharmaceuticals Inc SUPN.O surged 17.1% after its
experimental drug for attention deficit hyperactivity disorder
met the main goal of a late-stage study in adults. Shares of Nikola Corp NKLA.O fell 9.8% after it called off a
deal to develop electric garbage trucks with recycling and waste
disposal firm Republic Services Inc RSG.N . American Airlines Group AAL.O and United Airlines Holdings
UAL.O rose 2.7% and 2.8%, respectively, after revealing plans
to bring back furloughed employees this month. The airline
industry is hoping to receive about $15 billion in payroll
support as part of the pending fiscal relief package.
Advancing issues outnumbered declining ones on the NYSE by a
2.74-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers.
The S&P 500 posted 31 new 52-week highs and no new lows; the
Nasdaq Composite recorded 261 new highs and two new lows.