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Stocks move broadly higher as receding debt fears spur rally

Markets in Europe and Asia were also broadly higher.
FILE - The New York Stock Exchange is seen in New York, in this Monday, Nov. 23, 2020, file photo. Stocks are opening higher on Wall Street Thursday, Oct. 7, 2021, amid signs a standoff in Congress over the federal debt ceiling is closer to a resolution.
FILE - The New York Stock Exchange is seen in New York, in this Monday, Nov. 23, 2020, file photo. Stocks are opening higher on Wall Street Thursday, Oct. 7, 2021, amid signs a standoff in Congress over the federal debt ceiling is closer to a resolution. [ SETH WENIG | AP ]
Published Oct. 7

Stocks rose broadly on Wall Street as investors welcomed the end of a standoff in Congress over extending the federal debt ceiling.

The S&P 500 rose 1.4 percent as of 1:13 p.m. Eastern. Roughly 90 percent of stocks within the benchmark index gained ground. The Dow Jones Industrial Average rose 496 points, or 1.4 percent, to 34,913 and the Nasdaq rose 1.6 percent.

Markets in Europe and Asia were also broadly higher.

The market was already in the midst of a days-long bout of volatility when Senate GOP leader Mitch McConnell made an offer Wednesday that would allow an emergency extension of the debt ceiling. Senate Majority Leader Chuck Schumer said Thursday an agreement has been reached with Republicans to extend the government’s borrowing authority into December.

The debt ceiling caps the amount of money the federal government can borrow and it needed to be raised by Oct. 18. Treasury Secretary Janet Yellen had warned that the the nation would likely face a financial crisis and economic recession if Congress failed to do so.

The debt ceiling debate and the potential for an unprecedented federal default is one of many concerns weighing on the market. Those worries sent the benchmark S&P 500 swinging between daily gains and losses of more than 1 percent for four days.

Investors received another encouraging piece of news on Thursday after the Labor Department reported that the number of Americans applying for unemployment benefits fell last week for the first time in four weeks. The labor market has been struggling to recover from the pandemic’s initial impact 18 months ago when lockdowns from COVID-19 gutted jobs.

Wall Street will get another snapshot Friday of the job market and its recovery when the Labor Department releases its employment report for September. The employment market’s recovery has been closely watched for any clues on how soon the Federal Reserve will ease its unprecedented support for the markets and economy. Inflation also remains a key concern because persistently high inflation could prompt the central bank to start raising interest rates sooner than expected.

Friday’s jobs report will likely have little impact on the Fed’s plan to start trimming its bond buying and on its timeline to start raising interest rates, said Jason Pride, chief investment officer of private wealth at Glenmede. He said that a lot of the mismatch between a slowdown in employment growth and a rise in job openings is circumstantial, such as people holding off on a return to the workforce to take care of family or learning new skills to find different jobs.

“I don’t think there’s anything that the Fed does with movement in interest rates or bond buying that will change people’s decision as to when they get back to the workforce,” he said. “It’s time to start taking the foot off of the pedal.”

Wall Street could see less volatility once the Fed actually starts trimming its bond purchases, he said, because “people will get comfortable with the pace and they’ll see the markets and economy can handle it.”

Bond yields rose. The yield on the 10-year Treasury rose to 1.56 percent from 1.52 percent late Wednesday.

COVID-19 continues to hamper the economic recovery following a surge of cases over the summer. Consumer spending and job growth was stunted and supply chain problems crimped operations in a wide range of industries.

More positive news on fighting off future spikes of the virus came from Pfizer on Thursday. It asked U.S. regulators to allow use of its COVID-19 vaccine in children ages 5 to 11. The drug developer’s stock rose 1.8 percent.

By DAMIAN J. TROISE AP Business Writer