Wednesday, October 20

Wall Street rises on optimism about US debt-ceiling deal


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US stock indexes rose on Wednesday, recouping early losses and turning positive as investors grew more optimistic that congressional Democrats and Republicans could reach a deal to avert a government debt default.

Top US Senate Republican Mitch McConnell said his party would support an extension of the federal debt ceiling into December, a move that would head off a historic default with a heavy economic toll.

“McConnell made some dovish comments about temporarily extending the debt ceiling,” said Jay Hatfield, founder and portfolio manager at Infrastructure Capital Advisors. “That’s going to be interpreted in the short-run as positive.”

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McConnell’s offer could provide an off-ramp to a months-long standoff between President Joe Biden’s Democrats and McConnell’s Republicans, who had been expected on Wednesday to block a third attempt by Senate Democrats to raise the $28.4 trillion debt ceiling.

In afternoon trade, the Dow Jones Industrial Average was up 0.14% at 34,363.3 points, while the S&P 500 gained 0.25% to 4,356.69.

The Nasdaq Composite added 0.43% to 14,495.61.

Stocks fell early after a strong showing of private jobs in September fueled bets the Federal Reserve could start reining in monetary stimulus soon.

Mega-cap growth stocks Amazon and Microsoft both were last up more than 1%, surging after the benchmark US 10-year Treasury yield retreated from three-month highs by early afternoon.

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The ADP National Employment Report showed private payrolls increased by 568,000 jobs last month. Economists polled by Reuters had forecast a rise of 428,000 jobs.

“Positive labor market data comes with the implication that the Fed can tighten policy at a quicker pace. But the fact that hiring is up shouldn’t be discounted — it’s definitely a good thing in terms of recovery,” said Mike Loewengart, managing director , investment strategy at E*TRADE Financial.

The more comprehensive non-farm payrolls data is due on Friday. It is expected to cement the case for the Fed’s slowing of asset purchases.

Oil prices hit multi-year highs early, but crude prices retreated from those highs while the S&P 500 energy sector index slid 1%, the weakest performer among 11 sector indexes.

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American Airlines Group fell 3.7% after Goldman Sachs cut its rating on the carrier to “sell” from “neutral.”

Shares in steelmaker Nucor Corp dropped 2.5% after Goldman Sachs lowered its rating to “neutral” from “buy.”

Declining issues outnumbered advancing ones on the NYSE by a 1.71-to-1 ratio; on Nasdaq, a 1.55-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 25 new highs and 229 new lows. (Additional reporting by Shreyashi Sanyal, Devik Jain and Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty, Maju Samuel and David Gregorio)

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