FOX Business: Capitalism Lives Here
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U.S. equities surged on Wednesday as analysts grew more hopeful a deal to raise the debt ceiling may be in reach.
As of 2:50 p.m. ET, the Dow Jones Industrial Average climbed 170 points, or 1.1%, to 15337, the S&P 500 advanced 19.2 points, or 1.1%, to 1717 and the Nasdaq Composite climbed 40.5 points, or 1.1%. to 3834.
It's all about politics.
As has become a daily ritual on Capitol Hill, several plans emerged Tuesday to stave off a potential American default ahead of the October 17 deadline imposed by the Treasury Department. However, those plans all fell through amid deep partisan divides between the Democratic-controlled Senate and the Republican-powered House.
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The tide turned on Wednesday. The Senate forged a bi-partisan agreement to boost the debt ceiling and re-open the federal government. That legislation is expected to actually be sent to the House, where it could still face resistance. If the House does pass it, then the Senate would vote on it, and it would head to President Barack Obama's desk.
Still, lawmakers' inability to pass legislation began reverberating through credit markets Tuesday. Fitch put the U.S. 'AAA' credit rating on watch for a downgrade and the U.S. government saw tepid demand at a bond auction.
Analysts at Goldman Sachs took a cautious note despite the progress.
"There is a possibility the October 17 deadline could still be met, though the odds have increased that it will be missed given the time it will take to pass any deal," the investment bank wrote to clients. "Regardless, while the market may react poorly to going beyond the October 17 deadline, if the debt limit is raised before next week the financing consequences for the Treasury are very manageable."
Meanwhile, in corporate news, Bank of America (BAC), the second-biggest U.S. bank by assets, posted better-than-expected quarterly earnings. PepsiCo (PEP) also revealed results that beat Wall Street's expectations.
Apple (AAPL) was said to cut orders for its low-end 5c iPhone, according to multiple news reports.
On the economic front, the National Association of Home Builders’ gauge of housing market sentiment fell in October to 55, the lowest level since June, from 57 the month prior. The measure missed analyst’s estimates it would rise to 58.
The Federal Reserve said in its anecdotal Beige Book report the U.S. economy grew at a ‘modest to moderate’ pace in September and the beginning of October across its 12 districts. However, a battle in Congress over raising the debt ceiling, coupled with the partial government shutdown, caused an ‘increase in uncertainty.’
In commodities, U.S. crude oil futures fell 32 cents, or 0.32%, to $100.90 a barrel. Wholesale New York Harbor gasoline was flat at $2.66 a gallon. Gold advanced $7.20, or 0.57%, to $1,281 a troy ounce.