By Dow Jones Business News, October 16, 2013, 12:40:00 PM EDT
By Chris Dieterich
NEW YORK--Stocks climbed on optimism that lawmakers were poised to reach a deal to avoid a potential U.S. debt
The Dow Jones Industrial Average rose 195 points, or 1.3%, to 15363 in midday trading. The S&P 500 index gained 22
points, or 1.3%, to 1720. The Nasdaq Composite Index advanced 43 points, or 1.1%, to 3837.
The stock market has seen big swings in recent days as lawmakers wrangle over an agreement to assure the U.S. can meet
its debt obligations and reopen the government. Wednesday's stock gains more than erased the Dow's 133-point decline on
Tuesday, which came on reports that negotiations between congressional leaders had stalled.
On Wednesday, Senate leaders in both parties were putting the finishing touches on an agreement to temporarily raise
the nation's debt ceiling and fully reopen the government ahead of a key debt-limit deadline at midnight. That deal
would have to make it through the Republican-controlled House, where progress for a deal hit a wall on Tuesday.
All 10 of the S&P 500's sectors pushed higher, driven by financial stocks. Bank of America gained 2.3% after reporting
third-quarter earnings that rose above expectations, as net-interest income and investments improved and credit charge-
"It's a relief rally," said Ron Florance, deputy chief investment officer at Wells Fargo Private Bank, which oversees
$170 billion. "We don't think, as irresponsible as [Congress] has been, they would drive us into default."
Hopes of a U.S. fiscal deal boosted demand for a sale of $20 billion in Treasury debt due in a month, helping the U.S.
government reduce its borrowing cost from levels that had jumped in recent weeks amid fears about hitting the debt
ceiling. Wild swings continued to whip Treasury bills Wednesday, perceived as ultra-safe investments. In recent trade,
the T-bill due Oct. 31 yielded 0.4%, down from a session peak of 0.685% earlier. The T-bill due Oct. 24 yielded 0.388%,
down from a session peak of 0.722%.
The yield on the 10-year Treasury note recently rose to 2.727% from 2.718% late Tuesday, as prices fell.
Mr. Florance said he expects stocks to continue to rise this week on the back of any deal. Longer term, though, he
said that any compromise would be a short-term fix, and the likelihood for similar fiscal battles in the future means
his firm will be "looking at higher growth rates outside of the U.S." to drive stock investments.
Mr. Florance said he still expects U.S. stocks to march higher into next year, but will be looking for chances to sell
U.S. stocks and buy foreign ones, particularly in Europe, he said.
Time is running out before the U.S. Treasury has said it will exhaust its emergency borrowing powers on Oct. 17. While
a failure to reach a deal before midnight wouldn't directly lead to a U.S. debt default, it would leave the Treasury
with only about $30 billion to pay the nation's bills, likely enough for several weeks.
Brinkmanship in Washington prompted Fitch Ratings late Tuesday to put the U.S. sovereign credit rating under review
for a downgrade, pointing to prolonged negotiations over the debt ceiling.
"We've seen outsize reactions on any signs of a deal, so it's not a surprise that the potential for a new deal has the
market up significantly," said Kristina Hooper, U.S. investment strategist at Allianz Global Investors, which has $409
billion in assets under management. "But we've also seen the market experience disappointments, and we expect to see
volatility as the news flow comes out about negotiations."
Intel declined after the semiconductor maker provided a downbeat sales outlook for the current quarter. Intel also
said it was a quarter behind in its plan to start volume production of the latest technology chips, offsetting better-
than-expected third-quarter earnings, revenue and gross margin.
Yahoo fell 1% after the Internet company reported third-quarter earnings that topped estimates, offsetting a current-
quarter revenue outlook that was just shy of forecasts.
A round of economic data showed U.S. home builders are feeling less confident about the sector's rebound amid the
impasse in Washington. The October reading of the National Association of Home Builders's housing-market index came in
at 55, two points lower than a downwardly revised 57 in September.
November crude-oil futures ticked up 0.9% to $102.07 a barrel, after falling to more than a three-month low on
Tuesday. October gold futures fell 0.1% to $1,272 a troy ounce. The dollar rose against euro and the yen.
In Europe, the benchmark Stoxx 600 index rose 0.2%. Asian markets were mixed. Japan's Nikkei Stock Average added 0.2%,
while China's Shanghai Composite shed 1.8% as investors grew cautious ahead of economic growth data out on Friday.
--Min Zeng contributed to this article.
(END) Dow Jones Newswires
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