Debt Ceiling 2013: Wall Street rebounds on news that government default could be averted
NEW YORK (AP) - The stock market broke out of a three-week funk Thursday as Washington moved closer to a deal to avert a U.S. government default.
The Standard & Poor's 500 index rose 19 points, or 1.2 percent, to 1,676. The Dow Jones industrial average jumped 178 points, or 1.2 percent, to 14,984 after the first hour of trading. The Nasdaq composite index added 53 points, or 1.5 percent, to 3,731.
The market has been sliding since mid-September as the gridlock in Washington got investors worried that the U.S. could default on its debt and wreak havoc on financial markets. As of Wednesday the S&P 500 index had fallen 4 percent since reaching an all-time high of 1,725 on Sept. 18.
President Barack Obama will meet with top House Republicans at the White House to seek a path beyond a confrontation that has left the government shuttered for more than a week.
House GOP leaders appear to be ready to advance a short-term debt limit increase that would prevent a default on U.S. government debt next week. How long the debt limit will be extended has not been decided.
A potential compromise between the two political parties could not come soon enough.
On Thursday, Treasury Secretary Jacob Lew urged Congress to raise the government's borrowing limit before the current cap is reached on Oct. 17, warning that a Republican idea to prioritize payments with cash on hand could cause "irrevocable damage" to the U.S. economy.
On Wednesday, Fidelity Investments, the nation's largest money market fund manager, said it had sold all of its short-term U.S. government debt in an effort to limit money market investors' exposure to a potential default.
There were hopeful signs in the market for short-term U.S. government debt early Thursday. The yield on the one-month Treasury bill fell to 0.20 percent from 0.27 late Wednesday.
The yield had spiked from near zero at the beginning of the month to as high as 0.35 percent Tuesday as investors dumped the bills out of concern that the government might not be able to pay them back when they're due. Investors demand higher yields when they perceive debt as being risky.
Among stocks making big moves:
- Teva Pharmaceuticals rose $4.40, or 3 percent, to $144.50 after the generic drug maker announced it was cutting its workforce by 10 percent.
- Ruby Tuesday plunged $1.38, or 18 percent, to $6.18. The restaurant chain reported a wider first quarter loss than expected, citing increased competition a difficult economic climate.
- Citrix Systems dropped $8.39, or 12 percent, to $58.28 after the company warned investors that its third-quarter revenue and profit will miss Wall Street's expectations.