Market rally gains steam as Congress makes progress on debt-ceiling deal, Dow now up 500 points

Market rally gains steam as Congress makes progress on debt-ceiling deal, Dow now up 500 points

Stocks jumped on Thursday as Congress appeared to near a deal that would raise the debt limit in the short term and avoid a disastrous government default.

The Dow Jones Industrial Average rose about 505 points, or 1.4%, helped by gains in Visa, Nike and Home Depot. The S&P 500 rallied 1.4% and the technology-focused Nasdaq Composite jumped 1.5%. Thursday’s gains put the major averages in the green for the week.

Stocks rose broadly on Thursday with technology shares and reopening plays trading higher. Twitter rose 2.6%, Nvidia popped 1.7% and AMD rose 1.6%. Facebook gained after JPMorgan said it was time to buy the recent dip on the stock.

Meanwhile, General Motors rose 1%. Costco shares added 2% after reporting better-than-expected September sales.

Washington’s race to reach an agreement on the debt ceiling has been an overhang for the market this week as investors hoped to avoid a government default.

Stocks reversed their downward course on Wednesday when Senate Minority Leader Mitch McConnell offered a short-term suspension proposal to Senate Democrats. They were likely to accept the deal that would raise the debt ceiling by a specific amount and allow the government to keep operating until some point in December.

“While we believe a debt ceiling deal will get done, politicians may need some market ‘motivation.’ This could keep near-term volatility elevated,” said Christopher Harvey, senior equity analyst at Wells Fargo Securities. “We view yesterday’s offer from Senate GOP leadership not as a durable solution, but rather as an invitation to stave off a potentially immediate disaster — a small positive.”

Following the news on Wednesday, the Dow reversed a 459-point drop and ended more than 100 points higher. The S&P advanced 0.4%, after falling as much as 1.27%. The Nasdaq Composite rose 0.5%, after dropping as much as 1.2%.

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Also helping sentiment on Thursday, weekly jobless claims fell sharply last week as the enhanced unemployment benefits ended, the Labor Department reported Thursday. Initial filings for unemployment benefits totaled 326,000 for the week ended Oct. 2, below the 345,000 Dow Jones estimate and a drop from the previous week’s 364,000.

October has been an especially volatile month, driven by uncertainty about U.S. fiscal and monetary policy and supply chain constraints. Markets may also be treading lightly heading into the third quarter earnings season, which begins next week.

Investors are awaiting Friday’s closely watched jobs report. The data is monitored by the Federal Reserve, as it mulls when to pull back its emergency pandemic stimulus measures, though the central bank has said it will look to wind down its bond-buying program soon.

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