Debt talks push US stocks higher
Stocks rose yesterday, helped by signs that Washington was moving closer to a deal that would avert a default by the US government.
The stock market started the session broadly lower after negotiations between the White House and House Republicans broke down over the weekend.
However, stocks erased those losses in early afternoon trading following news that President Barack Obama would meet with Congressional leaders.
The market extended those gains after Senate leaders in both parties said progress was being made.
Democratic Majority Leader Harry Reid opened the Senate session yesterday by saying he was "very optimistic we will reach an agreement this week that's reasonable in nature". The Republican Senate leader, Mitch McConnell, seconded Mr Reid's view, saying there had been "a couple of very useful discussions".
The Dow Jones industrial average added 64.15 points, or 0.4%, to close at 15,301.26. The index was down as much as 100 points earlier in the day.
The Standard & Poor's 500 index rose 6.94 points, or 0.4%, to 1,710.14. The Nasdaq composite rose 23.40 points, or 0.6%, to 3,815.27.
The United States will reach the limit of its borrowing authority on Thursday, according to estimates from the Treasury Department. If the debt ceiling is not raised, investors fear the US could default on its borrowings in the coming weeks.
Yesterday's modest gains follow a surge in the market last week on signs of progress between Congressional Republicans and the White House. The Dow jumped 323 points on Thursday, its biggest gain of the year, and rose another 111 points on Friday.
Investors continue to express hope that a deal can be reached before the debt crisis causes any lasting damage. In the last few years, political deals over major budget disputes have gone down to the last minute.
"We don't need some well-crafted, detailed deal," said Quincy Krosby, market strategist with Prudential Financial. "We just need to buy some time so they can keep negotiating."
The US government remains partially shut down because House Republicans want to attach conditions to a budget bill that would scale back the country's new health care law. President Obama is insisting that the government be reopened without strings attached. The partial shutdown is entering its third week.
Investors should brace for more volatility this week as long as the debt ceiling remains unresolved, said John Lynch, regional chief investment officer for Wells Fargo Private Bank.
"We're basically trading on the news at this point," he said.
Wall Street also has a busy week of corporate earnings to work through. Coca-Cola, Johnson & Johnson and Citigroup report their results today.