Stocks rallied Thursday as lawmakers moved closer to a temporary resolution that would prevent the nation from defaulting on its debt for the first time ever in less than two weeks, reversing recent losses stemming from the uncertainty and pushing up a slew of recently battered industries.
The Dow Jones Industrial Average jumped 500 points, or 1.5%, to 34,917 as of 11:00 a.m. EDT Thursday, helping the index erase nearly two weeks worth of losses fueled by the potential default on October 18.
Meanwhile, the S&P 500 climbed 1.5% and the tech-heavy Nasdaq 1.7%, similarly paring sharp declines in the past two weeks and putting the indexes about 2% and 4% below all-time highs set last month, respectively.
Stocks edged higher immediately after Senate Majority Leader Chuck Schumer (D-N.Y.) announced Democrats would agree to an offer from Senate Minority Leader Mitch McConnell to lift the debt ceiling by $480 billion through December, buying lawmakers time to negotiate a longer-term deal after weeks of fraught negotiations.
Major indexes jumped as much as 2% after McConnell made the offer Wednesday afternoon—a major pivot for the top Republican who repeatedly struck down measures to suspend the debt limit for a full year.
A slew of stocks across industries led the Thursday rally, with energy firm Freeport-McMoRan, betting company Penn National Gaming and online retailer eBay heading up gains in the S&P, climbing 7%, 6% and 5%, respectively.
What To Watch For
From the Senate floor, Schumer said he hopes the chamber can vote on the compromise debt limit deal as early as Thursday afternoon. In a morning note, analyst Adam Crisafulli, founder of Vital Knowledge Media, acknowledged markets are celebrating the deal but cautioned uncertainty won’t fully fade until lawmakers reach a long-term solution.
Despite the Thursday deal, it’s still unclear how Democrats will push to raise or suspend the debt limit on their own. On Wednesday, McConnell doubled-down on his refusal to support a long-term measure unless Democrats abandon efforts for another multi-trillion-dollar spending package. He said the stopgap measure should give Democrats “more than enough time to pass stand-alone debt limit legislation” on their own through a special budgetary process called reconciliation, which would bypass Republican support by requiring only a simple majority of votes in favor. However, Democrats have pushed back on using reconciliation to tackle debt, with House Speaker Nancy Pelosi (D-Calif.) instead pushing for a bipartisan vote. “When President Trump was President, we Democrats supported lifting the debt ceiling because it’s the responsible thing to do,” Pelosi said after the House passed a standalone debt measure. “I would hope that the Republicans would act in a similarly responsible way.”