Dow surges 500 points as lawmakers reach deal on debt limit
The Dow Jones Industrial Average and other major US stock indexes surged Thursday after lawmakers reached a deal on a short-term debt-limit extension, avoiding — for now — an unprecedented and potentially devastating US debt default.
The Dow rose as much as 530 points, or 1.5 percent, Thursday while the S&P 500 also surged 1.5 percent. The Nasdaq saw gains of as much as 1.7 percent.
Thursday’s rally helped the major indexes recover from a slump earlier this week that hammered Big Tech companies and other growth stocks. All of the three major indexes are now in the green for the week.
The gains were spread widely across sectors, with everything from Big Tech and major retailers to industrials and pharmaceuticals posting gains.
The rally comes after Senate Majority Leader Chuck Schumer (D-NY) announced that lawmakers have reached a deal to temporarily increase the debt ceiling, avoiding a US government debt default that could have been devastating for the global economy. The deal will extend the debt ceiling through early December, he said.
Uncertainty over whether lawmakers would reach a deal in time has loomed over investors in recent days, pressuring stock prices.
“Today’s [market] is driven by a slight move in Washington towards rationality about being able to pay their bills, write some checks,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
She added, though, that some recent positive economic data is also likely helping buoy investor confidence.
US companies created 568,000 new jobs in September, more than economists had expected and topping the prior month’s gains in a sign of a renewed recovery in the labor market, according to data published Wednesday from payroll processing firm ADP.
The ADP report comes ahead of the more complete September jobs report that will be released tomorrow by the Labor Department.
And earlier Thursday, the feds reported that fewer than expected Americans filed for jobless claims last week, bolstering the outlook that the labor market is recovering once again after a setback in late summer.
“Those two bits of data fed into today’s good action because we’re expecting a pretty good number, but not a number so hot, that would force the Fed’s hand to really ramp up the taper. I think we’re going to get that Goldilocks number of employment,” Forrest said.
John Spallanzani, portfolio manager at Miller Value Partners, a Baltimore-based firm with $3.6 billion in assets under management, said he and his firm are bullish on the market outlook.
Thursday’s bounce was likely caused by a combination of the debt-ceiling agreement and the positive economic data, he said, adding that the market’s been range-bound for the past few months.
Spallanzani’s a value investor who focuses on long-term strategies, but he said he wouldn’t be surprised if the market rallies going into the end of the year as investors “chase performance.”
He added that investors are gearing up for the tapering of the Federal Reserve’s massive bond-buying program that’s given stocks a boost during the pandemic. If Friday’s jobs report comes in strong, he said, Powell may decide to begin tapering at the next Fed meeting, which is scheduled for November.
With Post wires
