Stocks surge after Senate reaches deal on US debt
NEW YORK -- Wall Street finally got the deal it's been waiting for.
A last-minute agreement to keep the U.S. from defaulting on its debt and reopen the government sent the stock market soaring Wednesday, pushing the Standard & Poor's 500 index close to a record high.
On Wednesday, Senate leaders agreed to fund the government through Jan. 15 and extend government borrowing through Feb. 7.
The Senate deal was reached just hours before a Thursday deadline that Treasury Secretary Jacob Lew had set to raise the $16.7 trillion debt limit.
Wall Street had bet that politicians wouldn't let the U.S. default, a calamity economists said could paralyze lending and push the economy into another recession.
"We knew it was going to be dramatic, but the consequences of a U.S. default are just so severe that the base case was always that a compromise was going to be reached," said Tom Franks, a managing director at TIAA CREF, a large retirement funds manager.
Congress was racing to pass the legislation Wednesday.
If the deal wraps up soon, investors can turn their attention back to basics like earnings and the economy. Corporations have begun to report third-quarter earnings, but Wall Street has been glued to the budget brinksmanship. Overall earnings at companies in the S&P 500 index is forecast to grow 3.1 percent from a year earlier, according to data from S&P Capital IQ. That's slower than the growth of 4.9 percent in the second quarter and 5.2 percent in the first quarter.
It'll be harder for Wall Street to get an up-to-date view of the economy because the partial government shutdown that began Oct. 1 has kept agencies from releasing key reports on trends like hiring. In general, though, the economy has been expanding this year.
On Wednesday, the Dow Jones climbed 205.82 points, or 1.4 percent, to 15,373.83. The S&P 500 gained 23.48, or 1.4 percent, at 1,721.54. That's only four points below its record close of 1,725.52 set Sept. 18.
The Nasdaq composite climbed 45.42, or 1.2 percent, to 3,839.43.
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