Wall Street rallies on Washington budget deal
Traders work on the floor at the New York Stock Exchange in New York, Wednesday, Oct. 16, 2013. An 11th-hour deal to end the government shutdown and raise the US debt ceiling sparked a strong rally on Wall Street Wednesday, with gains of nearly 1.4 percent. AP
NEW YORK CITY—An 11th-hour deal to end the government shutdown and raise the US debt ceiling sparked a strong rally on Wall Street Wednesday, with gains of nearly 1.4 percent.
The Dow Jones Industrial Average closed up 205.82 points (1.36 percent) at 15,373.83.
The broader S&P 500 rose 23.48 (1.38 percent) to 1,721.54, and the Nasdaq Composite gained 45.42 (1.20 percent) at 3,839.43.
Although it was not a completely done deal—final votes were still required in both houses of Congress late Wednesday—it was expected that the crisis that had unnerved global markets would be over by Thursday.
“This agreement is likely to prevent a government default on its debt and spending as well as reopen previously closed non-essential government services,” said Gary Thayer at Wells Fargo Advisors.
“However, the compromise does not resolve all the budget problems; it only provides a temporary postponement. Nevertheless, reducing the risk of default could help lift sentiment and boost economic activity over the near term.”
Big banks led the surge: Bank of America, which beat profit forecasts for its third quarter, gained 2.3 percent, Citigroup 4.1 percent and JPMorgan Chase 3.2 percent.
In Nasdaq tech shares, Facebook led the way with a 3.3 percent jump while Google added 1.8 percent.
Fresh third-quarter earnings from a number of companies had a mixed impact.
Dow component Intel rose 1.3 percent despite cutting its forecast for the rest of the year. For the third quarter the chipmaker beat forecasts slightly.
Railway operator CSX fell 0.8 percent despite a 1.8 percent gain in quarterly profits. The company pointed out a significant drop in the volume of coal it hauls.
Pepsico shares were up 2.1 percent despite third-quarter earnings of $1.91 billion that were barely higher than a year earlier.
Apple shares were 0.5 percent higher despite reports that it had cut back orders for its new iPhone 5C due to slow demand in the market for the smartphone.
Toolmaker Stanley Black & Decker dropped 14.3 percent after sharply cutting its earnings forecast for the year, even as the company reported a 44 percent profit gain for the third quarter.
Bond prices surged on the news of a Washington deal. The 10-year Treasury yield fell to 2.67 percent from 2.72 percent late Tuesday, while the 30-year dropped to 3.72 percent from 3.78 percent. Bond prices and yields move inversely.
