By Dow Jones Business News, October 11, 2013, 12:37:00 PM EDT
--Stocks higher, tacking on gains after steep rally
--Investors hoping for more signs of thaw in Washington
--House Republicans continue meetings with Obama over debt ceiling
By Dan Strumpf
U.S. stocks tacked on further gains as investors grew more confident that Washington would iron out a deal to raise
the nation's borrowing limit, while two big banks offered mixed earnings reports.
The Dow Jones Industrial Average rose 79 points, or 0.5%, to 15205 in midday trade. On Thursday, the Dow soared 323
points, the biggest one-day point gain since December 2011, on signs that the political impasse is thawing.
The S&P 500 on Friday added 8 points, or 0.5%, to 1701. The Nasdaq Composite Index added 24 points, or 0.6%, to 3785.
The gains indicate that investors are embracing the signs of progress in Washington, however limited, market observers
said. The Obama administration and House Republicans continued to negotiate Friday to reach a deal on extending the
nation's borrowing authority for six weeks and reopening the federal government.
On Thursday, the two sides discussed a Republican proposal to raise the debt ceiling for six weeks, though the meeting
ended without a deal.
"There's still more politics to come, but at least they're talking," said Doug Cote, chief market strategist at ING
Investment Management. "The market is assuming this gets resolved."
Mr. Cote cautioned investors against trading on the news flow out of Washington, saying the biggest risk is that they
"prematurely sell" if a deal isn't immediate. He said investors should remain focused on stock fundamentals,
particularly as earnings season gets underway.
"We are in third-quarter earnings season and it's been coming out reasonably well," he said.
The Treasury Department has said the nation's debt limit will be reached on Oct. 17. Russ Koesterich, chief market
strategist at BlackRock, said stocks were likely to remain volatile if Washington proves able to raise the nation's debt
limit for just a short period of time.
"There is some haircut you have to give to GDP the longer this happens," he said. "There is some impact on consumer
confidence and business confidence."
Among the biggest companies reporting Friday, the results were mixed. J.P. Morgan Chase's stock recovered early losses
after reporting that it swung to a rare net loss in the third quarter after taking billions of dollars in legal
expenses. The Dow component's adjusted earnings were better than expected on strength in deposit growth, credit-card
spending and investment-banking results.
The stock has been little changed over the last month, and since the end of the second quarter.
Wells Fargo was little changed after the nation's largest mortgage lender reported third-quarter earnings that topped
estimates but revenue that fell a bit shy, amid lower mortgage-banking revenue and a decline in net interest margin.
Meanwhile, a reading on consumer sentiment indicated U.S. consumers turned less optimistic about the economy in early
October. The Thomson-Reuters/University of Michigan preliminary October sentiment index slipped to 75.2 from an end-
September level of 77.5, according to an economist who has seen the numbers.
The index had reached 85.1 at the end of July, which had been the highest reading since before the recession.
Economists surveyed by Dow Jones Newswires expected the early October index to fall to 75.0.
The yield on the 10-year Treasury note slipped to 2.663% from 2.686% late Thursday
European markets got a further lift from optimism over U.S. debt-ceiling talks, with the Stoxx Europe 600 up 0.4%
after rising 1.7% on Thursday.
Asian markets were broadly higher on the back of U.S. strength, with Japan's Nikkei Stock Average rising 1.5% and
China's Shanghai Composite climbing 1.7%.
In other corporate news, Gap retreated 7% after the apparel retailer said late Thursday September same-store sales
declined from a year ago in all of its branded stores.
Safeway rallied 7% after the grocery-store chain said it would exit from the Chicago market, bowing to pressure from
activist shareholder Jana Partners. The company also reported late Thursday third-quarter adjusted earnings that missed
-Write to Dan Strumpf at firstname.lastname@example.org
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