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Stocks soar on views that threat of default is easing
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Specialist Jay Woods is reflected in a screen at his post on the floor of the New York Stock Exchange on Thursday. Wall Street roared in approval Thursday after Washington appeared to break an impasse that threatened to push the country into default.
Associated Press
NEW YORK
You can almost hear Wall Street exhaling.
The Dow Jones industrial average soared more than 300 points Thursday after Republican leaders and President Barack Obama took what investors saw as steps toward ending a 10-day budget standoff that has threatened to leave the U.S. unable to pay its bills.
Wall Street’s hopes for a deal drove the Dow to its biggest point rise this year and ended a three-week funk in stocks. They also injected some calm into the frazzled market for short-term government debt.
Republican leaders said they would vote to extend the government’s borrowing authority for six weeks. A spokesman for Obama said the president would “likely” sign a bill to increase the nation’s ability to borrow money so it can continue paying its bills.
“Congressmen and women are coming to terms with how calamitous it would be if the debt ceiling was not raised,” said Joseph Tanious, global market strategist for J.P. Morgan Asset Management. “Cooler heads are prevailing.”
The Dow jumped 323.09 points, or 2.2 percent, to close at 15,126.07, its high for the day.
The final surge came even as Senate Majority Leader Harry Reid said Democrats would not negotiate with Republicans as long as the government remains partly shut. Reid’s comments were reported about 15 minutes before the market closed at 4 p.m.
Stocks have steadily declined since mid- September as Washington’s gridlock got investors worried that the U.S. could default on its debt and wreak havoc on global financial markets. While traders applauded a potential deal between the White House and Congress, more volatility could be ahead if it falls through.
“We don’t need some grand bargain. We just need to avoid a default,” said Brian Reynolds of chief market strategist at Rosenblatt Securities. “Just don’t bring us to the edge again.”
The Standard & Poor’s 500 index rose 36.16 points, or 2.2 percent, to 1,692.56, and the Nasdaq composite rose 82.97 points, or 2.3 percent, to 3,760.75.
Thursday’s gains were extraordinarily broad. Of the 500 stocks in the S&P 500 index, only 11 fell. Banks and industrial stocks rose the most.
A possible compromise between the two political parties could not come soon enough. Treasury Secretary Jack Lew has said the government will hit its borrowing limit Thursday. That would leave the U.S. with enough cash to last just a week or two before a default became a real risk.
A short-term extension of the debt limit is “the right approach,” said Jack Ablin, who manages $66 billion as chief investment officer at BMO Private Bank.
“It allows politicians to turn down the heat a bit while still keeping the broader issues on the front burner,” Ablin said.