Dow jumps over 500 points as lawmakers reach temporary debt-limit fix

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U.S. stocks rose sharply Thursday, as lawmakers reached an agreement that will at least temporarily avert a breach of the U.s. debt ceiling and a government default.

What are major indexes doing?

  • The Dow Jones Industrial Average rose 528.50 points, or 1.5%, to 34,945.49.
  • The S&P 500 advanced 64.32 points, or 1.5%, to 4,427.87.
  • The Nasdaq Composite was up 64.32 points, or 1.5%, at 4,427.87.

On Wednesday, the Dow scored its biggest intraday comeback since December, erasing a loss of nearly 460 points to end with a gain of 102 points, or 0.3%. The S&P 500 rose 0.4% and the Nasdaq Composite gained 0.5%.

What’s driving the market?

Stocks extended early gains after Senate Majority Leader Chuck Schumer, D-New York, said in a floor speech that top Democrats and Republicans in the chamber had “reached agreement to extend the debt ceiling through early December, and it’s our hope that we can get this done as soon as today.”

U.S. Treasury Secretary Janet Yellen had previously warned that a breach of the debt ceiling could occur as early as Oct. 18 unless Congress took action.

Sen. Mitch McConnell, the minority leader and Kentucky Republican, had effectively ended near-term worries around the debt ceiling on Wednesday by announcing that Republicans would not filibuster an increase. The move only gives two more months of breathing space, but lawmakers say that will provide enough time for critical negotiations on spending to take place.

“Everyone blinked yesterday, as it became clear — once again — that the politicians, the Federal Reserve and the country’s business leaders will never allow the debt ceiling nonsense to threaten a U.S. default,” said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.

At the same time, talks in Switzerland between U.S. and Chinese officials set the stage for reports that U.S. President Joe Biden and Chinese leader Xi Jinping will meet virtually before the end of the year. Hong Kong’s Hang Seng stock index surged 3.1%, its strongest one-day surge since July 29.

Energy prices also continued to cool off, reacting to Russian President Vladimir Putin’s statement that gas producer Russia would seek to stabilize prices. The lead U.K. natural-gas contract dropped 5%.

“Investors welcomed positive talks in the U.S. about the debt ceiling while European traders were also pleased to see Russia offering its energy support to the Old Continent to mitigate the risk of a supply crunch,” said Pierre Veyret, technical analyst at ActivTrades.

In U.S. economic data, the Labor Department said weekly initial claims for unemployment benefits fell 38,000, to 326,000, in the week ended Oct. 2. The September employment report is due Friday morning.

U.S. stock indexes have been volatile in October on concerns about the federal debt ceiling and a rise in bond yields as inflation fears have grown while investors await the third quarter corporate earnings reporting season starting next week.

Which companies are in focus?

  • Shares of Levi Strauss & Co. rose more than 10% after the jeans company late Wednesday beat Wall Street estimates for the quarter and raised its outlook for the year.
  • Twitter Inc. late Wednesday said it was selling MoPub, a mobile-ad network, for $1.05 billion in cash to marketing-software company AppLovin Corp. Twitter shares were up 4.2%, while AppLovin jumped 8.7%.
  • Shares of Rocket Lab USA Inc. rose 9.9%, after an announcement late Wednesday that NASA signed on with the company to demonstrate the U.S. agency’s Advanced Composite Solar Sail System, or ACS3.

What are other assets doing?

  • The yield on the 10-year Treasury note rose 3.5 basis points to 1.557%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, fell 0.2%.
  • The U.S. oil benchmark reversed an early loss to rise 0.7% on the New York Mercantile Exchange. Gold futures were down 0.2%.
  • In European equities trade, the Stoxx Europe 600 jumped 1.6% and London’s FTSE 100 gained 1.3%.
  • The Hang Seng Index jumped 3.1% in Hong Kong, while Japan’s Nikkei 225 gained 0.5%.

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