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Wall Street extends its rally as the Senate reaches a deal on raising the debt ceiling. | tnewst.com Press "Enter" to skip to content

Wall Street extends its rally as the Senate reaches a deal on raising the debt ceiling.

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U.S. stocks jumped on Thursday, adding to Wednesday’s gains, as investors reacted with relief to the news of an agreement in the Senate to raise the federal borrowing limit and pull the country from the brink of a debt default.

The S&P 500 gained 0.8 percent, while the Nasdaq composite was up 1.1 percent. European stock indexes also rallied on Thursday, rebounding from a sharp decline the day before. The Stoxx Europe 600 closed 1.6 percent higher.

The rally picked up steam after top Democrats and Republicans in the Senate on Thursday said they had struck an agreement that would allow the debt ceiling to be raised through early December.

“It’s our hope that we can get this done as soon as today,” Senator Chuck Schumer of New York, the majority leader, said on the Senate floor. Senator Mitch McConnell of Kentucky, the minority leader, had said on Wednesday that Republicans would allow Democrats to vote on a short-term extension after weeks of disagreement over raising the debt ceiling. News of Mr. McConnell’s offer helped Wall Street rebound in late trading on Wednesday and end the day with a small gain.

The agreement eased investor concerns, at least until the first Friday in December, when Congress faces its next deadline to fund the government and raise the debt ceiling. Wall Street had been growing increasingly alarmed by the failure to reach a compromise, and warnings about the consequences of inaction grew increasingly dire. Running into the federal borrowing limit could mean delays in payments of Social Security benefits and to government contractors, including hospitals that accept patients who use Medicare and Medicaid benefits.

“The agreement is just kicking the can down to December, but that’s not something investors are concerning themselves with right now,” said Fiona Cincotta, a senior financial markets analyst at Forex.com. “The political bickering left a cloud over the markets, and the fact that that’s moved on has been a plus.”

Gains were tempered somewhat by a jump in government bond yields. The yield on 10-year U.S. Treasury climbed to 1.58 percent from 1.52 percent, deflating some of the earlier gains in the equity markets.

The two-day rally means that the S&P 500 is now on track to end the week with a gain of about 1 percent, which would be its best weekly showing since late August, before Wall Street grew jittery about the debt ceiling, spiking inflation and the prospect that the Federal Reserve will begin to withdraw some of its support for the economy.

Investors face one more hurdle this week. On Friday, the labor department will release its monthly jobs report for September. It could help economists understand how much the Delta variant of the coronavirus might have affected the economic recovery after hiring slowed dramatically in August. Economists surveyed by Bloomberg are forecasting that the U.S. economy added 500,000 jobs during September, a sharp gain from the 235,000 added in August.

Ahead of Friday’s report, the government said that initial claims for regular unemployment benefits fell last week, dropping to 38,000 to 326,000 after three consecutive weekly increases. For the week ending Sept. 18, about 4.2 million people were receiving some form of unemployment assistance, down 854,638 from the previous week.

“The combination of easing labor supply constraints, strong labor demand and an improving Covid outlook should spur further labor market progress in coming months,” Lydia Boussour, the lead U.S. economist at Oxford Economics, wrote in a note.

Oil prices continued to rise, with West Texas Intermediate, the U.S. benchmark, gaining 1.1 percent to $78.30.


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